Announces 2021 Guidance, Long-term Growth
Targets, and Capital Investment Plans
- Strong 2020 results of $3.91 per share, an increase of 14%
over 2019 results of $3.43 per share
- 2021 diluted earnings per share guidance range of $4.18 to
$4.28
- Five-year EPS compound annual growth rate (CAGR) of 7 to
10%
- Increasing regulated investment over the next 10
years
- Continued ESG priorities with new environmental
goals
American Water Works Company, Inc. (NYSE: AWK), the largest
publicly traded U.S. water and wastewater utility company, today
reported 2020 results of $3.91 per share, compared to $3.43 per
share in 2019. The Company today also announced 2021 diluted
earnings per share guidance, long-term EPS growth targets, and
capital investment plans.
“Highlights of our achievements in 2020, an unprecedented year,
include approximately $1.9 billion in capital investment, continued
cost management, success in growth with 23 completed regulated
acquisitions, the addition of our 17th military installation
contract, and the execution of enhanced COVID-19 safety protocols,”
said Walter Lynch, president and CEO of American Water.
“We will continue to build on that momentum in 2021, providing
essential services across our footprint, investing much needed
capital of just under $2 billion for infrastructure replacement,
resiliency, and strategic growth where we create the most value for
all of our stakeholders and an unrelenting commitment to safety and
operational excellence,” added Lynch. “Our 2021 earnings guidance
and long-term targets are based on the continued execution of our
strategic goals from the outstanding dedication and performance of
our employees.”
2021 Investor Day
American Water will host a virtual 2021 Investor Day on February
25, 2021, at 9:00 a.m. Eastern Standard Time. The event will
feature presentations by Walter Lynch, president and chief
executive officer; Susan Hardwick, executive vice president and
chief financial officer; and other company leaders. The company
will outline its vision and strategy for the future and discuss
strategic activities to drive value creation. The company will also
discuss an increased capital investment program to provide reliable
and sustainable water and wastewater services and its ongoing
effort to enhance customer experience.
Interested parties may access the video webcast through a link
on the Company’s Investor Relations website at ir.amwater.com.
Presentation slides that will be used in conjunction with the event
will also be made available online. The Company recognizes its
website as a key channel of distribution to reach public investors
and as a means of disclosing material non-public information to
comply with its obligations under SEC Regulation FD.
Following the event, an archive of the webcast will be available
for one year on American Water’s investor relations website at
ir.amwater.com/events.
The company’s earnings guidance, capital spending, dividend
growth, rate base growth and O&M efficiency forecasts are
subject to numerous risks and uncertainties, including, without
limitation, those described under “Forward-Looking Statements”
below and under “Risk Factors” in its annual and quarterly reports
filed with the Securities and Exchange Commission (SEC).
2021 Earnings Guidance and Long-Term Outlook
- 2021 earnings guidance range of $4.18 to $4.28 per
share
- Long-term EPS growth expectation of 7-10% for
2021-2025
- 2021-2025 investment plan of $10.3-$10.5 billion and
expected $22-$25 billion for the 10-year period of
2021-2030
- 2021-2025 rate base growth expectation of 7-8%
- 2021-2025 dividend growth expectation at the high end of
7-10%
- 2021-2025 plan includes $700 million of public equity
issuances to support growth
- 2025 O&M efficiency target of 30.4%
Consolidated Results
For the three months ended December 31, 2020, earnings were
$0.80 per share, compared to $0.54 per share in the same period of
2019, an increase of $0.26 per share. Results for the Regulated
Business increased $0.01 per share and results from the
Market-Based Business increased $0.22 per share. Parent Company
results improved $0.03 per share in the fourth quarter of 2020 as
compared to the same period in 2019. Consolidated results reflect a
$0.02 per share benefit from depreciation not recorded as required
by assets held for sale accounting in 2020 and the loss of $0.19
per share on the disposal of Keystone Clearwater Solutions in the
fourth quarter of 2019.
For the twelve months ended December 31, 2020, earnings were
$3.91 per share, compared to $3.43 per share in the same period of
2019, an increase of $0.48 per share. Results from the Regulated
Business increased $0.33 per share, while the Market-Based
Businesses’ results improved $0.24 per share compared to 2019.
Parent Company results were $0.09 per share lower in 2020 as
compared to 2019, due primarily to higher interest expense.
Regulated results are higher from the impact of increased revenues
from new rates in effect as well as earnings from acquisitions,
offset somewhat by higher operation and maintenance costs and
depreciation resulting from growth in the business. Regulated
results also reflect an estimated $0.10 per share favorable impact
year-over-year due to warmer and drier than normal weather across
several of the Company’s subsidiaries in 2020 and unusually wet
weather conditions in 2019. And finally, regulated results reflect
a $0.06 per share benefit from depreciation not recorded as
required by assets held for sale accounting in 2020. Market-Based
Business results improved compared to 2019 from the addition of
installations for the Military Services Group and new partnerships
and price increases in the Homeowner Services Group. As compared to
2019, improved results in 2020 reflect the $0.19 per share loss on
the disposal of Keystone Clearwater Solutions in the fourth quarter
of 2019. Market-Based Business and consolidated results also
include an estimated $0.02 per share unfavorable impact from the
COVID-19 pandemic, primarily in the Homeowner Services Group.
In 2020, the Company made capital investments of $1.9 billion,
including $1.8 billion dedicated primarily to infrastructure
improvements in the Regulated Businesses and $135 million for
regulated acquisitions.
Regulated Businesses
The Regulated Businesses’ net income was $154 million and $715
million in 2020, compared to $152 million and $654 million in 2019
for the fourth quarter and year to date period, respectively. The
increases are primarily due to additional authorized revenues from
infrastructure investments, acquisitions and organic growth, offset
somewhat by higher O&M expenses and depreciation to support
regulated acquisitions and other growth.
For the quarter, Regulated Businesses revenue increased
approximately $16 million from additional authorized revenues from
infrastructure investments, acquisitions and organic growth,
partially offset by a decrease in other operating revenues due to
the impacts of the Tax Cuts and Jobs Act. O&M expenses were
higher by $19 million to support regulated acquisitions and other
growth, while depreciation increased $10 million, mainly related to
infrastructure investment growth.
For the year, Regulated Businesses revenue increased
approximately $161 million from additional authorized revenues from
infrastructure investments, acquisitions and organic growth and an
estimated $23 million from warmer than normal weather in 2020 and
unusually wet weather conditions during 2019, partially offset by a
decrease in other operating revenues due to the impacts of the Tax
Cuts and Jobs Act. O&M expenses were higher by $76 million to
support growth in the Regulated Businesses and depreciation
increased by $33 million, mainly related to infrastructure
investment growth.
The Company expects additional annualized revenues of
approximately $56 million from general rate cases, including step
increases, and approximately $95 million from infrastructure
surcharges that have been completed. The Company is in various
stages of general rate cases in four jurisdictions and filed for
infrastructure surcharges in two jurisdictions, for a total
annualized revenue request of approximately $208 million.
For the year 2020, the Company’s adjusted regulated O&M
efficiency ratio (a non-GAAP financial measure) was 34.3%, compared
to 34.5% for 2019.
Market-Based Businesses
In the fourth quarter of 2020, net income in the Market-Based
Businesses was $23 million, compared to a net loss of $18 million
for the same period in 2019. 2019 results include a loss of $35
million on the disposal of Keystone Clearwater Solutions.
Net income in the Market-Based Businesses in 2020 was $91
million, compared to $46 million for the same period in 2019.
Military Services Group benefited from the addition of two
installations (Joint Base San Antonio and U.S. Military Academy at
West Point, New York), which were awarded in the third quarter of
2019. The Company became fully operational on these installations
as of June 1, 2020. In addition, results from the Homeowner
Services Group were higher on new partnerships and price increases
in 2020. Partially offsetting these increases were estimated
impacts from the COVID-19 pandemic on the Homeowner Services Group
from increased claims that likely have resulted from more work from
home activity. Lastly, 2019 results include the previously
mentioned $35 million loss on the disposal of Keystone Clearwater
Solutions.
Dividends
On December 10, 2020, the Company's board of directors declared
a quarterly cash dividend payment of $0.55 per share of common
stock payable on March 2, 2021, to all shareholders of record as of
February 8, 2021.
Non-GAAP Financial Measures
This press release includes a presentation of adjusted Regulated
O&M efficiency ratio, which excludes from its calculation
estimated purchased water and other revenues and purchased water
expenses, the impact of certain activities related to the Freedom
Industries chemical spill, and the allocable portion of non-O&M
support services costs, mainly depreciation and general taxes. This
item constitutes a “non-GAAP financial measure” under SEC rules.
The items discussed above were excluded from the calculation as
they are not reflective of management's ability to increase the
efficiency of the Regulated Businesses.
This item is derived from American Water’s consolidated
financial information but is not presented in its financial
statements prepared in accordance with GAAP. This non-GAAP
financial measure supplements and should be read in conjunction
with the Company’s GAAP disclosures and should be considered as an
addition to, and not a substitute for, any GAAP measure. Management
believes that this non-GAAP financial measure is useful to the
Company’s investors because it directly measures improvement in the
operating performance and efficiency of the Regulated Businesses.
The Company’s adjusted Regulated O&M efficiency ratio is not
based on a standard, objective industry definition or method of
calculation and may not be comparable to other companies’ operating
measures, and thus it may have significant limitations on its
use.
Set forth in this release is a table that reconciles each of the
components used to calculate adjusted Regulated O&M efficiency
ratio to the most directly comparable GAAP financial measure.
Management is unable to present a reconciliation of adjustments
to the components of the forward-looking Regulated O&M
efficiency ratio without unreasonable effort because management
cannot reliably predict the nature, amount or probable significance
of all of the adjustments for future periods; however, these
adjustments may, individually or in the aggregate, cause the
non-GAAP financial measure component of the forward-looking ratio
to differ significantly from the most directly comparable GAAP
financial measure.
About American Water
With a history dating back to 1886, American Water is the
largest and most geographically diverse U.S. publicly-traded water
and wastewater utility company. The Company employs approximately
7,000 dedicated professionals who provide regulated and
market-based drinking water, wastewater and other related services
to over 15 million people in 46 states. More information can be
found by visiting amwater.com and follow American Water on Twitter,
Facebook and LinkedIn.
Cautionary Statement Concerning Forward-Looking
Statements
Certain statements in this press release including, without
limitation, 2021 earnings guidance, future capital spending
amounts, rate base and dividend growth projections, the impacts to
the Company of the COVID-19 pandemic, and estimated revenues from
rate cases and other government agency authorizations, are
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. In some cases, these
forward-looking statements can be identified by words with
prospective meanings such as “intend,” “plan,” “estimate,”
“believe,” “anticipate,” “expect,” “predict,” “project,” “propose,”
“assume,” “forecast,” “outlook,” “future,” “pending,” “goal,”
“objective,” “potential,” “continue,” “seek to,” “may,” “can,”
“will,” “should” and “could” and/or the negative of such terms or
other variations or similar expressions. These forward-looking
statements are predictions based on American Water's current
expectations and assumptions regarding future events. They are not
guarantees or assurances of any outcomes, financial results of
levels of activity, performance or achievements, and readers are
cautioned not to place undue reliance upon them. The
forward-looking statements are subject to a number of estimates and
assumptions, and known and unknown risks, uncertainties and other
factors. Actual results may differ materially from those discussed
in the forward-looking statements included in this press release as
a result of the factors discussed in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2020, and subsequent
filings with the SEC, and because of factors such as: the decisions
of governmental and regulatory bodies, including decisions to raise
or lower rates and regulatory responses to COVID-19; the timeliness
and outcome of regulatory commissions’ and other authorities’
actions concerning rates, capital structure, authorized return on
equity, capital investment, system acquisitions and dispositions,
taxes, permitting, water supply and management, and other
decisions; changes in customer demand for, and patterns of use of,
water, such as may result from conservation efforts, impacts of the
COVID-19 pandemic, or otherwise; a loss of one or more large
industrial or commercial customers due to adverse economic
conditions, the COVID-19 pandemic, or other factors; limitations on
the availability of the Company’s water supplies or sources of
water, or restrictions on its use thereof, resulting from
allocation rights, governmental or regulatory requirements and
restrictions, drought, overuse or other factors; changes in laws,
governmental regulations and policies, including with respect to
environmental, health and safety, consumer and data privacy, water
quality and water quality accountability, contaminants of emerging
concern, public utility and tax regulations and policies, and
impacts resulting from U.S., state and local elections and changes
in federal, state and local executive administrations; weather
conditions and events, climate variability patterns, and natural
disasters, including drought or abnormally high rainfall, prolonged
and abnormal ice or freezing conditions, strong winds, coastal and
intercoastal flooding, pandemics (including COVID-19) and
epidemics, earthquakes, landslides, hurricanes, tornadoes,
wildfires, electrical storms, sinkholes and solar flares; the
outcome of litigation and similar governmental and regulatory
proceedings, investigations or actions; the risks associated with
the Company’s aging infrastructure, and its ability to
appropriately maintain and replace current infrastructure and
systems, including its technology and other assets, and manage the
expansion of its businesses; exposure or infiltration of the
Company’s technology and critical infrastructure systems, including
the disclosure of sensitive, personal or confidential information
contained therein, through physical or cyber attacks or other
means; the Company’s ability to obtain permits and other approvals
for projects and construction of various water and wastewater
facilities; changes in the Company’s capital requirements; the
Company’s ability to control operating expenses and to achieve
operating efficiencies; the intentional or unintentional acts of a
third party, including contamination of the Company’s water
supplies or water provided to its customers; the Company’s ability
to obtain adequate and cost-effective supplies of equipment
(including personal protective equipment), chemicals, electricity,
fuel, water and other raw materials; the Company’s ability to
successfully meet growth projections for the Regulated Businesses
and the Market-Based Businesses, either individually or in the
aggregate, and capitalize on growth opportunities, including, among
other things, with respect to acquiring, closing and successfully
integrating regulated operations and market-based businesses,
entering into contracts and other agreements with, or otherwise
obtaining, new customers or partnerships in the Market-Based
Businesses, and realizing anticipated benefits and synergies from
new acquisitions; risks and uncertainties associated with
contracting with the U.S. government, including ongoing compliance
with applicable government procurement and security regulations;
cost overruns relating to improvements in or the expansion of the
Company’s operations; the Company’s ability to successfully develop
and implement new technologies and to protect related intellectual
property; the Company’s ability to maintain safe work sites; the
Company’s exposure to liabilities related to environmental laws and
similar matters resulting from, among other things, water and
wastewater service provided to customers; changes in general
economic, political, business and financial market conditions,
including without limitation conditions and collateral consequences
associated with the current pandemic health event resulting from
COVID-19; access to sufficient debt and/or equity capital on
satisfactory terms and when and as needed to support operations and
capital expenditures; fluctuations in interest rates; ability to
comply with affirmative or negative covenants in current or future
indebtedness of the Company or any of its subsidiaries, or the
issuance of new or modified credit ratings or outlooks by credit
rating agencies with respect to the Company or any of its
subsidiaries, or on any of their current or future indebtedness,
which could increase financing costs or funding requirements or
affect the Company's or its subsidiaries' ability to issue, repay
or redeem debt, pay dividends or make distributions; fluctuations
in the value of benefit plan assets and liabilities that could
increase the Company’s cost and funding requirements; changes in
federal or state general, income and other tax laws, including
future significant tax legislation, further rules, regulations,
interpretations and guidance by the U.S. Department of the Treasury
and state or local taxing authorities related to the enactment of
the Tax Cuts and Jobs Act, the availability of, or the Company's
compliance with, the terms of applicable tax credits and tax
abatement programs, and the Company’s ability to utilize its U.S.
federal and state income tax net operating loss carryforwards;
migration of customers into or out of the Company’s service
territories; the use by municipalities of the power of eminent
domain or other authority to condemn the systems of one or more of
the Company’s utility subsidiaries, or the assertion by private
landowners of similar rights against such utility subsidiaries; any
difficulty or inability to obtain insurance for the Company, its
inability to obtain insurance at acceptable rates and on acceptable
terms and conditions, or its inability to obtain reimbursement
under existing or future insurance programs and coverages for any
losses sustained; the incurrence of impairment charges related to
the Company’s goodwill or other assets; labor actions, including
work stoppages and strikes; the Company’s ability to retain and
attract qualified employees; civil disturbances or unrest, or
terrorist threats or acts, or public apprehension about future
disturbances, unrest, or terrorist threats or acts; and the impact
of new, and changes to existing, accounting standards.
These forward-looking statements are qualified by, and should be
read together with, the risks and uncertainties set forth above and
the risk factors included in American Water's annual, quarterly and
other SEC filings, and readers should refer to such risks,
uncertainties and risk factors in evaluating such forward-looking
statements. Any forward-looking statements speak only as of the
date of this press release. American Water does not have or
undertake any obligation or intention to update or revise any
forward-looking statement, whether as a result of new information,
future events, changed circumstances or otherwise, except as
otherwise required by the federal securities laws. Furthermore, it
may not be possible to assess the impact of any such factor on the
Company’s businesses, either viewed independently or together, or
the extent to which any factor, or combination of factors, may
cause results to differ materially from those contained in any
forward-looking statement. The foregoing factors should not be
construed as exhaustive.
AWK-IR
American Water Works Company, Inc. and
Subsidiary Companies
Consolidated Statements of
Operations
(In millions, except per share data)
For the Three Months Ended
December 31,
For the Years Ended December
31,
2020
2019
2020
2019
(Unaudited)
Operating revenues
$
923
$
902
$
3,777
$
3,610
Operating expenses:
Operation and maintenance
429
412
1,622
1,544
Depreciation and amortization
153
152
604
582
General taxes
78
71
303
280
Loss on asset dispositions and
purchases
—
43
—
34
Impairment charge.
—
—
—
—
Total operating expenses, net
660
678
2,529
2,440
Operating income
263
224
1,248
1,170
Other income (expense):
Interest, net
(99
)
(98
)
(395
)
(382
)
Non-operating benefit costs, net
12
4
49
16
Other, net
5
6
22
29
Total other income (expense)
(82
)
(88
)
(324
)
(337
)
Income before income taxes
181
136
924
833
Provision for income taxes
36
38
215
212
Net income attributable to common
shareholders
$
145
$
98
$
709
$
621
Basic earnings per share: (a)
Net income attributable to common
shareholders
$
0.80
$
0.54
$
3.91
$
3.44
Diluted earnings per share: (a)
Net income attributable to common
shareholders
$
0.80
$
0.54
$
3.91
$
3.43
Weighted-average common shares
outstanding:
Basic
181
181
181
181
Diluted
181
181
182
181
(a)
Amounts may not calculate due to
rounding.
American Water Works Company, Inc. and
Subsidiary Companies
Consolidated Balance Sheets
(In millions, except share and per share
data)
December 31, 2020
December 31, 2019
ASSETS
Property, plant and equipment
$
25,614
$
23,941
Accumulated depreciation
(5,904
)
(5,709
)
Property, plant and equipment, net
19,710
18,232
Current assets:
Cash and cash equivalents
547
60
Restricted funds
29
31
Accounts receivable, net of allowance for
uncollectible accounts of $60 and $41, respectively
321
294
Unbilled revenues
206
172
Materials and supplies
47
44
Assets held for sale
629
566
Other
127
118
Total current assets
1,906
1,285
Regulatory and other long-term assets:
Regulatory assets
1,127
1,128
Operating lease right-of-use assets
95
103
Goodwill
1,504
1,501
Postretirement benefit assets
173
159
Intangible assets
55
67
Other
196
207
Total regulatory and other long-term
assets
3,150
3,165
Total assets
$
24,766
$
22,682
American Water Works Company, Inc. and
Subsidiary Companies
Consolidated Balance Sheets
(In millions, except share and per share
data)
December 31, 2020
December 31, 2019
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock ($0.01 par value; 500,000,000
shares authorized; 186,466,707 and 185,903,727 shares issued,
respectively)
$
2
$
2
Paid-in-capital
6,747
6,700
Retained earnings (accumulated
deficit)
102
(207
)
Accumulated other comprehensive loss
(49
)
(36
)
Treasury stock, at cost (5,168,215 and
5,090,855 shares, respectively)
(348
)
(338
)
Total common shareholders' equity
6,454
6,121
Long-term debt
9,329
8,639
Redeemable preferred stock at redemption
value
4
5
Total long-term debt
9,333
8,644
Total capitalization
15,787
14,765
Current liabilities:
Short-term debt
1,282
786
Current portion of long-term debt
329
28
Accounts payable
189
203
Accrued liabilities
591
596
Accrued taxes
50
46
Accrued interest
88
84
Liabilities related to assets held for
sale
137
128
Other
215
174
Total current liabilities
2,881
2,045
Regulatory and other long-term
liabilities:
Advances for construction
270
240
Deferred income taxes and investment tax
credits
2,113
1,893
Regulatory liabilities
1,770
1,806
Operating lease liabilities
81
89
Accrued pension expense
388
411
Other
83
78
Total regulatory and other long-term
liabilities
4,705
4,517
Contributions in aid of construction
1,393
1,355
Commitments and contingencies
Total capitalization and liabilities
$
24,766
$
22,682
American Water Works Company, Inc. and
Subsidiary Companies
Adjusted Regulated Operation and
Maintenance Efficiency Ratio (A Non-GAAP, unaudited
measure)
(Dollars in millions)
2020
2019
2018
Total operation and maintenance
expenses
$
1,622
$
1,544
$
1,479
Less:
Operation and maintenance
expenses—Market-Based Businesses
389
393
362
Operation and maintenance
expenses—Other
(25
)
(31
)
(42
)
Total operation and maintenance
expenses—Regulated Businesses
1,258
1,182
1,159
Less:
Regulated purchased water expenses
149
135
133
Allocation of non-operation and
maintenance expenses
41
31
31
Impact of Freedom Industries settlement
activities (a)
—
(4
)
(20
)
Adjusted operation and maintenance
expenses—Regulated Businesses (i)
$
1,068
$
1,020
$
1,015
Total operating revenues
$
3,777
$
3,610
$
3,440
Less:
Operating revenues—Market-Based
Businesses
540
539
476
Operating revenues—Other
(18
)
(23
)
(20
)
Total operating revenues—Regulated
Businesses
3,255
3,094
2,984
Less:
Regulated purchased water revenues (b)
149
135
133
Other revenue
(7
)
—
—
Adjusted operating revenues—Regulated
Businesses (ii)
$
3,113
$
2,959
$
2,851
Adjusted O&M efficiency
ratio—Regulated Businesses (i) / (ii)
34.3
%
34.5
%
35.6
%
(a)
Includes the impact of a settlement in
2018 with one of the Company’s general liability insurance
carriers, and a reduction in the first quarter of 2019 of a
liability, each related to the Freedom Industries chemical spill in
West Virginia.
(b)
The calculation assumes regulated
purchased water revenues approximate regulated purchased water
expenses.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210224006102/en/
Edward Vallejo Vice President, Investor Relations 856-955-4445
edward.vallejo@amwater.com
Maureen Duffy Senior Vice President, Communications and External
Affairs 856-955-4163 maureen.duffy@amwater.com
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