American Water Reports Third Quarter 2009 Results

http://www.businesswire.com/news/home/20091109005475/en

* Net Income of $91.6 million, or $0.52 per share

* Revenues increase by $7.8 million to $680.0 million, despite wet, cool summer

* Decreases in water sold results in estimated reduction of $0.14 per share

* $53.2 million in new tax-exempt bonds issued during the third quarter 2009

* Cash flow from operations increase by almost $80 million to approximately $472
million for the nine months 2009

* Stock price remains steady as RWE reduces ownership to 23.5 percent

VOORHEES, N.J.--(Business Wire)--
American Water Works Company, Inc. (NYSE: AWK), the largest investor-owned U.S.
water and wastewater utility company, today reported results for the third
quarter ended September 30, 2009. For the quarter, the company reported
operating revenues of $680.0 million, a 1.2 percent increase of $7.8 million
over the same period in 2008. Net income in the third quarter was $91.6 million,
or $0.52 per basic and diluted common share, compared with $88.2 million or
$0.55 per basic and diluted common share in the third quarter of 2008.

"The results of this quarter were impacted by one of the wetter summers
experienced by much of the country," said Don Correll, president and CEO of
American Water. "Eleven out of 20 of our regulated state operations experienced
either above average rainfall, cooler temperatures, or in most cases, both.
Despite the weather, we achieved an increase in both revenues and net income as
we continue to execute our core strategies."

The company`s Regulated Businesses revenues increased by $17.6 million, or 2.9
percent, in the third quarter 2009, largely a result of recent recognition of
prudent investment through rate awards.Total volume of water sold decreased 7.4
percent for the quarter ended September 30, 2009, or 9.1 billion gallons from
the same period in 2008, largely as a result of weather. This decrease in volume
of water sold resulted in an estimated decrease of $44.2 million in revenues and
approximately $23.7 million in net income, or $0.14 per basic and diluted common
share.

The company`s Non-regulated Businesses` revenues decreased by $8.6 million or
11.7 percent for the third quarter, compared to the same period in 2008. The
decrease was primarily attributable to lower revenues in the Contract Operations
Group.

Operating expenses for the three-month period ended September 30, 2009, totaled
$465.6 million, an increase of $5.1 million or 1.1 percent over the same period
in 2008. This was primarily driven by increased pension and other
post-employment benefits expenses of $6.4 million and depreciation of $6.5
million. These increases were offset by lower costs in contract operations of
$9.4 million.

Net cash provided by operating activities for the nine months ended September
30, 2009, increased approximately $78.6 million or 20 percent to $471.6 million.

Construction expenditures for the nine months ended September 30, 2009, were
$592.9 million compared to $714.6 million in the prior year period. The company
anticipates investing approximately $800 million in construction and other
capital projects in 2009.

"American Water is committed to delivering reliable service to its customers,"
said Correll. "We are making infrastructure investments across this country and
in fact, recently reached a significant milestone in our current largest capital
project. Our 31-mile watermain and 20 million gallon a day treatment plant
project in Kentucky is more than 70 percent complete. This approximately $162
million project will ensure a sustainable supply for Central Kentucky for years
to come and is another example of our commitment to providing water solutions."

During the three months ended September 30, 2009, capital resource requirements
were met with internally generated cash, commercial paper issuance, debt
offerings, and access to bank credit lines. The company issued $53.2 million in
new tax-exempt bonds during the third quarter 2009 at rates ranging from 1.27
percent to 6.25 percent. Additionally, the company remarketed, at fixed rates,
$23.3 million in tax-exempt bonds at 6.25 percent during the third quarter 2009.

The company received authorizations for additional annualized revenues from
general rate cases of $16.8 million in the third quarter 2009, which brings the
total for the first nine months of the year to $31.4 million.As of September 30,
2009, the company was awaiting final orders for general rate cases in 10 states,
requesting $258.0 million in total additional annual revenues.

Subsequent to the quarter`s end, the company settled its rate case in
Pennsylvania, which grants an increase of approximately $30.8 million in annual
revenue in addition to the approximately $23.0 million previously received
through infrastructure surcharges. The company also filed a rate request in
Missouri, which will generate an additional $48.7 million in additional revenue
if approved as filed.

The extent to which requested rate increases will be granted by the applicable
regulatory agencies will vary.

American Water announced two major military contracts during the quarter. Its
Military Services Group was awarded contracts for the operation and maintenance
of the water and the wastewater systems at Fort Belvoir, Virginia and Fort
Meade, Maryland.

"American Water was extremely pleased to be awarded both contracts," said
Correll. "We will now be serving ten installations across the country and our
growing portfolio clearly demonstrates our commitment to providing military
bases with solutions to best manage their systems and delivering reliable water
and wastewater services."

American Water also announced the completion of a secondary public offering of
40.25 million shares of its common stock, priced at $19.25 per share, on August
18. In the offering, all the shares were sold by RWE, with all proceeds going to
RWE. RWE`s ownership has been reduced to 23.5 percent of American Water's
outstanding shares of common stock.

Also during the third quarter, the Board of Directors increased American Water`s
quarterly cash dividend payment by five percent from $0.20 to $0.21 per share on
July 31, 2009. On October 30, the Board declared its second dividend of $0.21
per share.

Non-GAAP Financial Measures

This press release includes a presentation of "Net income excluding impairment
charge," "Basic income per common share excluding impairment charge," "Diluted
net income per common share excluding impairment charge," and "Operating
expenses excluding impairment charge." Each of these items is derived from our
consolidated financial information but is not presented in our financial
statements prepared in accordance with U.S. generally accepted accounting
principles (GAAP). The items constitute "non-GAAP financial measures" under
Securities and Exchange Commission rules. These non-GAAP financial measures
supplement our GAAP disclosures and should not be considered an alternative to
the GAAP measure.

Management believes that the presentation of these adjusted measures is useful
to investors because it provides a means of evaluating the company`s operating
performance without giving effect to an impairment charge, which has been
triggered principally by market factors that are largely out of the control of
management and do not reflect the day-to-day operations of the company.
Moreover, management believes that this presentation facilitates comparisons
between the company and other companies in its industry. In preparing operating
plans, budgets and forecasts, and in assessing historical performance,
management relies, in part, on trends in the company`s historical results,
exclusive of impairment charges.

Set forth below are tables that reconcile the non-GAAP financial measures to the
most directly comparable GAAP financial measure.

Third Quarter 2009 Earnings Conference Call

The third quarter 2009 earnings conference call will take place Monday, November
9, 2009, at 9:00 a.m. Eastern Time. Interested parties may listen over the
Internet by logging on to the Investor Relations page of the company`s Web site
at www.amwater.com.

Following the earnings conference call, an audio archive of the call will be
available through November 16, 2009, by dialing 303-590-3030 for U.S. and
international callers. The access code for replay is 4173835. The online archive
of the webcast will be available through December 8, 2009, by accessing the
Investor Relations page of the company`s Web site located at www.amwater.com.

About American Water

Founded in 1886, American Water is the largest investor-owned U.S. water and
wastewater utility company. With headquarters in Voorhees, N.J., the company
employs approximately 7,300 dedicated professionals who provide drinking water,
wastewater and other related services to approximately 15 million people in 32
states and Ontario, Canada.

Cautionary Statement Concerning Forward-Looking Statements

Statements in this release that are "forward-looking statements" are based on
current expectations and assumptions that are subject to risks and
uncertainties. Actual results could differ materially because of factors such as
weather conditions, patterns or events, including drought or abnormally high
rainfall, changes in general economic, business and financial market conditions,
fluctuations in the value of benefit plan assets and liabilities that could
increase our costs and funding requirements, changes in laws, governmental
regulations and policies, including environmental, health and water quality and
public utility regulations and policies, the decisions of governmental and
regulatory bodies, including decisions to raise or lower rates, the timeliness
of regulatory commissions` actions concerning rates, migration into or out of
our service territories, our ability to obtain permits for expansion projects,
changes in customer demand for, and patterns of use of, water, such as may
result from conservation efforts, the availability of adequate and
cost-effective supplies of chemicals, electricity, fuel, water and other raw
materials that are needed for our operations, our ability to successfully
acquire and integrate water and wastewater systems that are complementary to our
operations and the growth of our business, our ability to manage the expansion
of our business, our ability to control operating expenses and to achieve
efficiencies in our operations, access to sufficient capital on satisfactory
terms, fluctuations in interest rates, restrictive covenants in or changes to
the credit ratings on our current or future debt that could increase our
financing costs or affect our ability to borrow, make payments on debt or pay
dividends, changes in our credit rating, changes in capital requirements, the
incurrence of impairment charges, difficulty in obtaining insurance at
acceptable rates and on acceptable terms and conditions, ability to retain and
attract qualified employees, cost overruns relating to improvements or the
expansion of our operations, and civil disturbance or terrorist threats or acts
or public apprehension about future disturbances or terrorist threats or acts.

For further information regarding risks and uncertainties associated with
American Water`s business, please refer to American Water`s annual, quarterly
and periodic SEC filings. The Company undertakes no duty to update any
forward-looking statement.

American Water Works Company, Inc. and Subsidiary Companies

Consolidated Statements of Operations (Unaudited)
In thousands except per share data

Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008

Operating revenues $ 679,956 $ 672,193 $ 1,842,866 $ 1,768,377

Operating expenses
Operation and maintenance 340,862 342,226 985,861 984,063
Depreciation and amortization 74,854 68,376 216,939 199,599
General taxes 50,618 49,380 154,814 151,074
Gain on sale of assets (784 ) 457 (976 ) (413 )
Impairment charge - - 450,000 750,000
Total operating expenses, net 465,550 460,439 1,806,638 2,084,323

Operating income (loss) 214,406 211,754 36,228 (315,946 )

Other income (deductions)
Interest, net (74,124 ) (72,684 ) (219,791 ) (212,718 )
Allowance for other funds used during construction 2,290 4,442 9,208 10,370
Allowance for borrowed funds used during construction 1,674 2,970 5,537 6,063
Amortization of debt expense (2,135 ) (1,601 ) (5,158 ) (4,360 )
Other, net (310 ) 825 (605 ) 1,375
Total other income (deductions) (72,605 ) (66,048 ) (210,809 ) (199,270 )

Income (loss) before income taxes 141,801 145,706 (174,581 ) (515,216 )
Provision for income taxes 50,165 57,548 94,873 83,612
Net income (loss) $ 91,636 $ 88,158 $ (269,454 ) $ (598,828 )

Basic earnings per common share: $ 0.52 $ 0.55 $ (1.62 ) $ (3.74 )

Diluted earnings per common share: $ 0.52 $ 0.55 $ (1.62 ) $ (3.74 )

Average common shares outstanding during the period:
Basic 174,595 159,949 165,992 159,960
Diluted 174,691 160,000 165,992 159,960

Dividends per common share $ 0.21 $ 0.20 $ 0.61 $ 0.20

American Water Works Company, Inc. and Subsidiary Companies

Condensed Consolidated Balance Sheet Information (Unaudited)
In thousands

September 30, December 31,
2009 2008

Cash and cash equivalents $ 7,831 $ 9,542
Other current assets 508,640 408,133
Total property, plant and equipment 10,532,131 10,123,928
Total regulatory and other long-term assets 2,297,107 2,690,215
Total Assets $ 13,345,709 $ 13,231,818
Short-term debt $ 76,556 $ 479,010
Current portion of long-term debt 54,325 175,822
Other current liabilities 469,750 449,928
Long-term debt 5,221,735 4,648,213
Total regulatory and other long-term liabilities 2,569,867 2,460,872
Contributions in aid of construction 961,667 911,415
Total stockholders' equity 3,991,809 4,106,558
Total Capitalization and Liabilities $ 13,345,709 $ 13,231,818

Operating Expenses Excluding Impairment Charge (A Non-GAAP, Unaudited Number)
In thousands

Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008

Total operating expenses, net $ 465,550 $ 460,439 $ 1,806,638 $ 2,084,323
Less: Impairment charge - - 450,000 750,000
Total operating expenses excluding impairment charge $ 465,550 $ 460,439 $ 1,356,638 $ 1,334,323

Net Income (Loss) Excluding Impairment Charge (A Non-GAAP, Unaudited Number)
In thousands

Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008

Net income (loss) $ 91,636 $ 88,158 $ (269,454 ) $ (598,828 )
Add: Impairment charge - - 450,000 750,000
Net income excluding impairment charge before associated tax benefit 91,636 88,158 180,546 151,172
Less: Income tax benefit relating to impairment charge - - 6,976 11,525
Net income excluding impairment charge $ 91,636 $ 88,158 $ 173,570 $ 139,647

Basic earnings per common share excluding impairment charge: $ 0.52 $ 0.55 $ 1.05 $ 0.87

Diluted earnings per common share excluding impairment charge: $ 0.52 $ 0.55 $ 1.05 $ 0.87

American Water Works Company, Inc.
Edward Vallejo
Vice President, Investor Relations
856-566-4005
edward.vallejo@amwater.com
or
Maureen Duffy
Director, Communications
856-309-4546
maureen.duffy@amwater.com

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