Good morning, and welcome to American Water's Fourth Quarter 2018 Earnings Conference Call. As a reminder, this call is being recorded and is also being webcast with an accompanying slide presentation through the Company's Investor Relations website. Following the earnings conference call, an audio archive of the call will be available through February 27, 2019. U.S. callers may access the audio archive toll-free by dialing the following number: 1(877)344-7529. International callers may listen by dialing 1 (412) 317-0088. The access code for replay is 10128489. The online webcast will be available at American Water's Investor Relations homepage at http://ir.amwater.com. I would now like to introduce you to the host for today's call, Ed Vallejo, Vice President of Investor Relations. Mr. Vallejo, you may begin.

Thank you, Phil, and good morning, everyone, and thank you for joining us for today’s call. As usual we will keep the call to about an hour and at the end of our prepared remarks, we will open the call for any of your questions. During the course of this conference call, both in our prepared remarks and answers to your questions, we may make Forward-Looking Statements that represent our expectations regarding our future performance or other future events. These statements are predictions based upon our current expectations, estimates and assumptions. However, since these statements deal with future events, they are subject to numerous known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from the results indicated or implied by such statements. Additional information regarding these risks, uncertainties and other factors as well as a more detailed analysis of our financials and other important information is provided in the earnings release and in our December 31st 2018 Form 10-K each has filed with the SEC. Reconciliations for non-GAAP financial information discussed on this conference call, including adjusted income, adjusted earnings per share, adjusted return on equity and our adjusted regulated O&M efficiency ratio, can be found in our earnings release and in the appendix of the slide deck for this call. Also, this slide deck has been posted to our Investor Relations page of our website. Now all these statements of this related to earnings and earnings per share refer to diluted earnings and earnings per share. And with that, I will now turn the call over to American Water’s President and CEO, Susan Story.

Thanks, Ed. Good morning everyone and thanks for joining us. Today our CFO, Linda Sullivan will cover in detail the fourth quarter and full-year financial results, and our COO, Walter Lynch who will give key updates on our operations. 2018 was a very eventful year for American Water, beginning with historic tax reform, the conclusion of several key rate cases and active acquisition year in both regulated and market based businesses, the sale and its continuation of a few market based business lines and a sharp focus on deploying smart technology and excelling at business fundamentals. Through it all, we further strengthened our loan risk and predictable growth story. We experienced continued growth in our regulated businesses from investment, acquisitions, and organic growth. Our market based businesses achieved very strong year-over-year growth led the Keystone impairment and provided increased cash to our overall business. Our $3.30 adjusted EPS is an 8.9% increase over adjusted 2017 EPS. We are affirming our 2019 EPS guidance range of $3.54 to $3.64 per share and we continue our focus on achieving the top half of our 7% to 10% EPS growth CAGR guidance though 2023. Our fundamental story at American Water remains the same and our performance is consistent as we report another strong year of results for 2018. The capital investment we make in regulated operations continues to be the foundation for our growth. $1.5 billion of the total of $2 billion that we invested in 2018 was for regulated infrastructure improvement with almost $400 million for acquisitions including our acquisition of Pivotal. Let me mention a few of our 2018 highlights. First, and most importantly we continued to be a safer Company in which our employees work. We finished 2018 with fewer employee injuries than in any other year recorded in our…

Thanks, Susan and good morning, everyone. As Susan mentioned, our regulated businesses had a strong year all around with historic capital investment, strategic acquisitions and continued O&M efficiency that benefits our customers. Turning to Slide 8. There was a significant amount of progress in the regulatory front throughout 2018 and continuing into 2019. Let me start with the New Jersey rate case. In October New Jersey American Water received in order to finalizing its rate case which was driven by more than $868 million in capital investment since our last rate case in 2015. The new rates represent a $40 million annual increase in water and waste water revenue with an authorized return in equity of 9.6% at an equity ratio of 54% up from 53% in the last case. The Board of Public Utilities also approved the rolling of $35 million distribution system improving charge. New Jersey American Water is providing breeze on single issue not covered by the settlement mainly the rate recovery of the acquisition adjustments for [indiscernible] acquisitions. We expect the decision by the end of the second quarter. Pennsylvania American Water received in order for its rate case with an authorized return on equity of 10% at an equity ratio of 53.75%. These new rates were effective in January 1st, 2018 and represent approximately $1.3 billion in investment to protect public health in more than 400 communities served by Pennsylvania American Water. In May, Missouri American Water received in order to finalizing their rate case resulting in approximately $38 million in additional annualized revenue with an authorized return on equity of 10% at an equity ratio of 52.8%. The new rates were driven by approximately $255 million in investment since our last rate case. In mid-December, California American Water received an order finalizing its rate…

Thanks you, Walter, and good morning, everyone. Let me start with our fourth quarter and full-year 2018 financial results on Slide 14. For the quarter, GAAP earnings were $0.62 per share compared to a loss of a penny in the same period last year. In the fourth quarter of both years, we adjusted GAAP earnings for the remeasurement of differed taxes resulting from the Tax Cuts and Jobs Act. You may recall that due to the complexity of the Act the SEC provided companies a one year window to finalize their estimates. We have now completed that process and recorded a $12 million or $0.07 charge in the fourth quarter of 2018 for the final remeasurement. Excluding this item in both years, adjusted fourth quarter earnings was $0.69 per share flat to the prior year as we expected mainly from a $0.05 favorable depreciation adjustment in the fourth quarter of 2017 and I will discuss the quarter in more detail in a moment. Our full-year GAAP earnings was $3.15 per share in 2018 which includes several adjustments, the remeasurement of differed taxes I just discussed, the gain from sale as the majority of contract operations, the impairment at Keystone and the final favorable insurance settlement related to the Freedom Industries chemical spill. Excluding these items and similar items in 2017, our adjusted earnings was $3.30 per share up 8.9% over adjusted earnings in 2017. Turning to Slide 15. Let me discuss the fourth quarter adjusted results in more details. Our regulated businesses were up $0.05 in total. Revenue was up $0.18 from rate authorizations to support capital investments acquisitions and organic growth. This revenue was reduced by the $0.16 impact from the lower Federal tax rate expected to benefit regulated customers. O&M expense increased $0.05 in total, with about $0.02…

Thank you Linda. America Waters has created a foundation based on continued execution of our strategies and this navigates us through market ups and downs and drives our long-term success. At a recent business dinner a non utility colleague asked me directly, "So with your evaluations why should I invest in American Water?" I laid out our investment thesis as summarized on this slide which many of you are familiar with, but which we are never tired of discussing. There are too many of these to address on this call, but as always we will be happy to engage with you at a later time on any or all of these factors. And all this is deemed to the 7100 people who are American Water. Once again when subzero temperatures hit in early January of this year, our folks were out there working 24 hours a day so that our customers have the precious resource of water at their faucets as well as critical fire protection and sanitation services. We had many great challenges throughout the Midwest, Mid-Atlantic, and northeast, but none were dramatic than in Iowa and Up State Michigan where temperatures dipped to minus 25 degrees with minus 50 degree wind shield. While we only worked emergencies during this brutal cold, we doubled and tripled crew sizes to enable very short work cycles and we provided the best protective equipment possible to ensure employees safety as they heroically work in this temperature into spring. These folks are amazing and they are the heart and soul what makes us successful. It is our firm belief that companies do well by doing good. More and more employees customers and inventors think to align themselves with companies who have responsible policies, make a positive impact in their communities, lead in protecting…

[Operator Instructions] The first question comes from Angie Storozynski with Macquarie Research. Please go ahead.

Thank you very much. Great results as always. I have a question about your market based businesses. How is the Pivotal acquisition or its integration into your business going on versus your original growth plans for this platform? I mean what are you seeing now? And secondly, how should we think about Keystone’s earnings contributions embedded in your 2019 guidance? Thank you.

Well I will start and Angie and then Linda can pickup. So the Pivotal integration has grown - really going exceedingly well, better than actually we thought it would. Culturally a great fit. As you saw from the numbers that Linda presented a very, very good year for the entire homeowner services organization and Pivotal was part of that as well as the legacy homeowner services which actually won five key partnerships which adds a tremendous impact on the future profitability and cash that we get from that business. And before I turn it over to Linda to talk about the financials, just quickly on Keystone. So as we mentioned on the third quarter call, so we had shutdown the trucking of water business and the construction business. And we are focusing on water transfer only and as we pointed out it was the most predictable and profitable. One thing to-date even this year we are seeing that hypothesis prove out with a very strong year to water transfer thus far in 2019. And as Linda said, you saw a little bit at the end of 2014 impact financially as we are taking finally closing out the entire construction business.

Yes, and I can add to that Angie. In terms of the Pivotal integration as Susan said its going very well. And in terms of our financial projection they are coming in as expected. And so we stand by our original projections that are included in the five year plan. From the perspective again as Susan mentioned, we closed out the construction business in the fourth quarter. So the bulk of that was impacted fourth quarter. We are seeing early this year the results as we anticipated and so we are excited about that we will update you more in the first quarter.

Great and my follow-up question maybe a little bit unfair, I admit it. So you are another large water company is about to have a very big equity issuance granted that it is to finance a gas acquisition. But do you think that will have a negative impact on your stock or you evaluation? Do you think that is just too early from the funds flow perspective this money would be coming in from your stock? Or you think that this diversification into the gas utility sector is actually going to attract the different source of money?

Well, Angie as always we don’t comment on other companies, but I will tell you in terms of American Water, the space for water is very scarce as you know and also for us we are seeing a significant growing focus on ESG and being a water utility positions us very strategically in that space. We are seeing a lot of interest as you probably notice globally, not just with utility fronts, but global infrastructure, global environment front. So there is a lot of money looking for good places to go. We think we are the best place for that money to go and so we are just going to continue to telling our story and we think there is a lot of interest given the story that we have got and the proven execution on these strategies and the fundamentals that we trying to exhibit every year, every quarter, every day.

Very good. Thank you.

The next question comes from Durgesh Chopra with Evercore ISI. Please go ahead.

Hey team, good morning. So just to start off, I have two questions. First in the quarter, Linda just is it fair to assume that when I look at the parent other segment quarter-over-quarter, majority of that $0.04 lower earnings contribution is Tax Reform related to that sort of a one-time event and as we are looking to do our 2019 models that should pretty much go away?

Yes, absolutely. $0.02 in the quarter was associated with Tax Reform and then when you move into 2019 that will be comparable year-over-year. And the other $0.02 was associated with the tax return true up that we had in the fourth quarter. Generally we true up either in the third or fourth quarter of each year.

Perfect, thanks. And then just going back to Walter. Any color on the acquisition adjustment here, any more color. I don’t know if you can provide maybe perhaps what rate base that is. And then just what are we assuming in 2019 guidance as it relates to what might be the outcome of those hearings?

Yes, Durgesh, just briefly on the adjustments, we submitted briefs and we are going to continue to work with the Board of Public Utilities to provide our side of the stories to why there should be recovery on those acquisitions. And as I said, we are looking at the end of the second quarter for the decision to come out from VP. I can't give a whole lot more guidance on that at this point.

That is fair. Thank you guys.

Thanks Durgesh.

The next question comes from Richard Verdi with Coker & Palmer. Please go ahead.

Hey good morning guys. Thank you for talking my call and great quarter. I wanted to follow-up actually on your first callers first enquiry, I had a very similar question, but I want to bring it back to the fourth quarter the way it was reported and kind of just give a little bit of an explanation for it. So on a consolidated basis, the Company beat our top-line estimate, but when I break it down and I look at the regulated revenue America reported $717 million, that's exactly what we have and the $30 million outperformance came on the non-regulated side. And my thinking is well maybe I didn't capture, maybe there were sales in there from the Keystone trucking and construction sale that maybe I should have picked up or it could have come from added strength from Pivotal that it just came in better than expected. So I'm wondering if you could just share and give a little bit more detail. How much of that non-regulated sales for the quarter? How much of that was from the Keystone construction and trucking? Did we just pick it up for October? And then how much of it was really from that Pivotal strengths? Because you know going forward modeling, I don't want to underestimate Pivotal obviously, and I don't want to add in trucking construction when it’s no longer going to be there.

Yes, Rich this is Linda. And if you look in the appendix to the slides, on Slide 30 we included additional detail on revenue, because of all of the moving parts in the fourth quarter. And you can see on that slide deck HOS from a revenue perspective was up $76 million of revenue and that was due to the better results for HOS as well as the integration of Pivotal. Keystone was up $6 million year-over-year from a quarter perspective, I’m sorry this is the full-year. $6 million Keystone was up and that is primarily from the increase in the water transfer business. And then we had lower revenue results from military services just from lower capital upgrades as well as our contract services group from the sale of that group this year. So that is included in the breakdown for revenue on Page 30 and I think that will help you.

For a clarification Rich, we did not sell Keystone's construction business or trucking. We shut it down. There was no revenue, that was related to that. And in our non-GAAP earnings we did not include the benefits from the sale of CSG. We simply did not include that, nor did we include a positive outcome from an interim sale. So what Linda said is, you look at that chart, this is truly from ongoing operations, this does not include any revenues from one-time sales.

Got it, okay. I'm sorry, I meant to say shut it down, I'm sorry I misspoke, I'm trying to think. Got it. okay, thank you for that. And then the second question is for the regulated acquisition front. I'm just wondering if there are any states where the Company is more heavily focused the next five years? And the reason why I asked that is because I noticed just the other day that the New Jersey assembly and the Senate approved a bill where local governments are going to be allowed to tax homeowners and companies that have very large paid surfaces because the pollutants from those surfaces are seeping into the water systems and so the extra tax revenue is going to be used for upgrading water systems and what have you. But thinking about it I mean no one want extra taxes right, higher taxes. So that is going to be very supportive of privatization. And then when you think about - so you think about that New Jersey you think about WIPA you think about the Water Accountability Act, you think that American Water is headquartered in New Jersey. You would think logically well, this is very supportive on the regulated acquisition front for American to really dive deeper into New Jersey. But at the same time the Company also wants to remain diversified. So just wondering if you could give us just some sort of color on that regulated acquisition front. Its maybe you are leaning more towards New Jersey or if there are any other states maybe who are more heavily focused on in next five years?

Great question Rich, thanks for that. We are focused on growing really across our footprint and I think as I said, we closed 23 acquisitions in 10 states, which shows that we are focused on growing across our footprint. Our state teams are leading this charge and they are focused on again providing solutions for communities in need and that's really what we are focused on. Yes, there are some great space New Jersey, Pennsylvania, Missouri, Indiana, Illinois that really have advanced I think the notion of private water companies providing solutions and you look at all the fair market value legislation out there that is encouraging us to do these kind of acquisitions. So we are really excited about the growth opportunities. As we said before, we have over 500,000 customer opportunities in our pipeline and that is because we are providing solutions and our communities recognize that and it’s just something we are very, very proud of.

And Rich you bring up a really good point and I think is going to be an ongoing policy move throughout the United States which is the actions the New Jersey is taking with all the concerns about contaminates and with all of the focus on the [perfluoro] (Ph) chemicals especially. We think that with the Water Quality Accountability Act with the things that are happening you are correct this does position us not just in New Jersey but in all of our states. Because for example on the perfluoro chemicals and that is the generic name for whether you are talking about PFOAs or PFNAs or name any of these type of chemicals. And why that is interesting is that while there was a lot of discussion around the EPAs position to not immediately form a maximum contaminant level, what most people may not understand is EPA does currently have a non-enforceable health advisory a [70 parts per trillion] (Ph). Well at American water we don’t wait for maximum contaminant levels, when the EPA has health advisories, we actually ensure that our systems are consistent with that. So we are already meeting the existing EPA health advisory. We test for it, we check for it, before it even becomes an MCL. Now I don’t know what that number is for municipalities, I don’t know what that number is for the companies, but I think your broader point which is as we see this in New Jersey, you see this as we think that that will become an issue everywhere, in all of our states we are starting to see a lot of concern about these contaminant. And as Walter said, when we talk about being a solutions provider, it’s not just buying answers and providing hopefully better service when we go in, because this is all we do water and wastewater, but it’s also providing critical health solutions for things like emerging contaminant. And also as Walter said in his comment, in some of states we are actually seeing the ability for us to go in and replace customer led service lines even if the lead's not in our pipes, because we can do it more cheaply as we are replacing our pipes. So that is the broader story around us being a solutions providing. And I think what you mentioned is going to be an increasing theme across this country as there is more and more concerns in all the states about these contaminants.

That is very interesting and excellent color. I really appreciate the time guys. Great quarter, great color and thank you very much.

Thank you.

Okay. This concludes our question-and-answer session. I would like to turn the conference back over to Susan Story for any closing remarks.

Thank you, Phil. And thanks everybody for participating in our call today. As always, we value you as our investor owners and as the financial analysts who research our Company for the benefit of your clients and their financial futures. We will always be open and transparent in all of our discussions and dealings with you, because we want you have to complete confidence in your decisions around our Company and the investments in our stock. If we have not been able to address your questions or you have additional questions, please call Ed or Ralph, and they will be happy to help. We look forward to talking to you again in our 2019 first quarter earnings call that will be on May the 2nd and our Annual Stock Conference meeting which will take place on Friday May the 10th. Thanks again for listening. We hope everybody has a great rest of your week.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.