American Water Reports Third Quarter 2012 Results, Demonstrating Strong Year-Over-Year Growth

  American Water Reports Third Quarter 2012 Results, Demonstrating Strong
  Year-Over-Year Growth

  *Net income and diluted earnings per share from continuing operations
    increased approximately 20 percent quarter over quarter to $154.1 million
    or $0.87 per share
  *Revenues increased approximately 9 percent, or $70.9 million, over third
    quarter of previous year to $831.8 million
  *Operations sustained, employees committed to providing service throughout
    Hurricane Sandy
  *Company reaffirmed 2012 earnings guidance range of $2.12 to $2.22 per
    share for continuing operations

Business Wire

VOORHEES, N.J. -- November 07, 2012

American Water Works Company, Inc. (NYSE: AWK), the largest publicly traded
U.S. water and wastewater utility company, today reported increases in
revenues, net income and earnings per share for the third quarter ended Sept.
30, 2012, as compared to the third quarter of 2011.

“We are pleased with the results American Water delivered this quarter,” said
Jeff Sterba, president and CEO of American Water. “We continued to
successfully deliver on our strategies for operational excellence, growth, and
customer and shareholder value. From cash management and customer satisfaction
to leveraging technology and best practices, to implementing the first phase
of our business transformation project to new IT platforms, our year-to-date
results demonstrate a business focused on continuous improvement. Most
recently, our employees’ efforts to maintain service in states hit hard by
Hurricane Sandy showed our ability to properly prepare and execute during an
exceptionally difficult time that affected many people’s lives.”

For the three months ended Sept. 30, 2012, the company reported income from
continuing operations of $154.1 million or diluted earnings per share of
$0.87, compared with $128.5 million, or $0.73 per share, for the comparable
period in 2011.

The company’s revenues increased $70.9 million to $831.8 million in the third
quarter of 2012, a 9.3 percent increase over the comparable quarter in 2011.
The company’s revenues increased $169.5 million to $2.2 billion for the first
nine months of 2012, an 8.4 percent increase over the comparable period in
2011. A portion of the increase in revenues is associated with higher demand
due to the hot, dry weather in the summer of 2012, particularly in the Eastern
and Midwest portions of the company’s regulated footprint. The company
believes the estimated impact continued to be approximately $0.13 to $0.16 per
share for the nine months ended Sept. 30, 2012, of which $0.06 to $0.09
represents the impact during the first six months of 2012.

Total operation and maintenance (O&M) expenses for the three months ended
Sept. 30, 2012, were $355.1 million, an increase of $14.8 million, or 4.3
percent, compared to the same period in 2011. Total O&M expenses for the nine
months ended Sept. 30, 2012, were $992.7 million, an increase of $14.4
million, or 1.5 percent, over the comparable period in 2011.

Net cash provided by operating activities for the nine months ended Sept. 30,
2012, was $735.0 million, compared to $576.0 million for the same period in
2011, which was primarily driven by the increase in operating revenues and
changes in working capital.

American Water anticipates investing approximately $925 million in
construction and other capital projects in 2012 to help ensure reliable water
and wastewater services. The company’s capital expenditures for the nine
months ended Sept. 30, 2012, were $680.4 million, compared to $621.9 million
for the same period in the prior year. The increase was mainly attributable to
increased spending on infrastructure replacement projects in the first quarter
due to the milder winter weather, expenditures associated with the company’s
business transformation project to new IT platforms, the replacement of a
1920s era water treatment facility in Milburn, N.J., and a $101 million
capital project in Pittsburgh, Pa.

Regulated Operations

American Water’s Regulated Businesses’ revenues in the third quarter increased
by $68.4 million, or 10.0 percent, over the prior year’s period, mainly driven
by new rates needed to deliver reliable services, increased consumption in the
company’s Eastern and Midwestern states, and additional revenues associated
with its acquisition of seven water systems in New York.

The Regulated Businesses’ O&M expenses increased $11.6 million, or 4.0
percent, over the prior year’s period, which is primarily attributed to
increased consumption and incremental operating costs associated with the
phase one launch period of the company’s business transformation project.  The
company’s continued focus on cost management and improving operational
efficiency was also reflected in the third quarter results. The Regulated
Businesses’ O&M efficiency ratio (a non-GAAP measure), improved to 40.9
percent from 44.9 percent for the 12 months ended Sept. 30, 2012.

American Water’s Regulated Businesses continued to prudently invest dollars to
upgrade and maintain their water systems. During the third quarter, the
company received a general rate case authorization in Illinois for additional
annualized revenues of $17.9 million. Also during the third quarter, a
regulatory decision was received in California American Water’s cost of
capital application, generating an additional $4.4 million in annualized
revenue. Subsequent to the quarter, a settlement agreement was approved for
the company’s Tennessee general rate case, which allows for an additional $5.2
million in annualized revenues.

As of Oct. 31, the company was awaiting a final order for a general rate case
in Virginia, requesting an additional $6.0 million in annual revenues,
including a $0.3 million nonjurisdictional component. A proposed settlement of
$2.3 million is currently pending approval by the Commission, which when
combined with the $0.3 million, would provide a net increase of $2.6 million
in revenues for the company. The extent to which requested rate increases will
be granted by the applicable regulatory agencies will vary. The primary driver
of the company’s rate requests is capital investments made to ensure reliable
service to customers.

“Making efficient use of capital to invest in our water systems is core to our
business. The improvements we have made over the years to successfully manage
through major weather events, like last week's hurricane, is just one example.
That is why we are working with regulators to adopt mechanisms that accelerate
needed improvements while being mindful of changes in rates,” said Sterba.
“The recent approval of distribution surcharges in New Jersey will have a
significant positive impact on the long-term reliability of water systems in
the state with the added benefit of creating hundreds of jobs annually.”

American Water also continued to execute its growth strategy. During the
quarter, the company acquired the water and wastewater systems serving
customers in a home development near Branson, Mo. In October, the company
completed two tuck-ins in Fayette County, Pa. In addition, Pennsylvania
American Water entered into two agreements with XTO Energy to construct
pipelines for supplying water to support shale gas drilling operations, as
well as provide public water service to adjacent residential areas. Both
projects are in partnership with XTO Energy and are located in Butler County.
These projects will expand the critical infrastructure needed to support the
region’s energy industry and help create jobs, while also bringing reliable
public water service to residential communities where it doesn’t currently
exist.

Market-Based Operations

American Water’s Market-Based Operations’ revenues and O&M expenses during the
third quarter of 2012 both remained flat as compared to the comparable quarter
in 2011.

During the quarter, American Water announced that its homeowner services
business, American Water Resources, Inc., has been selected by the New York
City Water Board as the official service line protection provider to
homeowners. American Water Resources’ Water and Sewer Line Protection Programs
will be available beginning in the first quarter of 2013 to an estimated
600,000 homeowners throughout the city’s five boroughs, making it the largest
municipal partnered water and sewer line protection contract in the U.S.

Quarterly Dividend

On Sept. 3, 2012, the company made cash dividend payments of $0.25 per share
to all shareholders of record as July 6, 2012. On Sept. 20, 2012, in
recognition of the company’s performance, American Water’s Board of Directors
declared a quarterly cash dividend of $0.25 per common share, payable on Dec.
3, 2012, to all shareholders of record as of Nov. 16, 2012.

Earnings Guidance

The company reaffirmed its 2012 earnings to be in the range of $2.12 to $2.22
per share for continuing operations, assuming normal weather patterns for the
balance of the year. The company has included in this range $0.13 to $0.16 per
share driven by the increased water sales experienced through the end of the
third quarter.

The company’s earnings forecasts are subject to numerous risks, including
those described under “Forward-Looking Statements” below and under “Risk
Factors” in its Annual Report on Form 10-K for the fiscal year ended Dec. 31,
2011.

Non-GAAP Financial Measures

This press release includes a presentation of O&M efficiency ratio, which
excludes from its calculation estimated purchased water revenues and purchased
water expenses. This item is derived from American Water’s consolidated
financial information but is not presented in its financial statements
prepared in accordance with U.S. generally accepted accounting principles
(GAAP). The item constitutes a “non-GAAP financial measure” under Securities
and Exchange Commission (SEC) rules. This non-GAAP financial measure
supplements the company’s GAAP disclosures and should not be considered an
alternative to the GAAP measure.

Management believes that the presentation of this measure is useful to
investors because it provides a means of evaluating the company’s operating
performance without giving effect to estimated purchased water revenues and
purchased water expenses, which involve items that are not reflective of
management's ability to increase efficiency of the company’s regulated
operations. 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 estimated revenues and expenses
related to purchased water.

Set forth below is a table that reconciles the non-GAAP financial measure to
the most directly comparable GAAP financial measure.

Third Quarter 2012 Earnings Conference Call

The third quarter 2012 earnings conference call will take place Thursday, Nov.
8, 2012, at 9 a.m. Eastern Time. Interested parties may listen over the
Internet by logging on to the Investor Relations page of the company’s website
at www.amwater.com.

Following the earnings conference call, an audio archive of the call will be
available through Nov. 15, 2012, by dialing 303-590-3030 for U.S. and
international callers. The access code for replay is 4567592. The online
archive of the webcast will be available through Dec. 10, 2012, by accessing
the Investor Relations page of the company’s website located at
www.amwater.com.

About American Water

Founded in 1886, American Water is the largest publicly traded U.S. water and
wastewater utility company. With headquarters in Voorhees, N.J., the company
employs approximately 7,000 dedicated professionals who provide drinking
water, wastewater and other related services to an estimated 15 million people
in more than 30 states and parts of Canada. More information can be found at
www.amwater.com.

Cautionary Statement Concerning Forward-Looking Statements

Certain statements in this press release are forward-looking statements within
the meaning of the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are predictions based on
American Water’s current expectations and assumptions regarding future events
and may relate to, among other things, its future financial performance,
including earnings, growth and portfolio optimization strategies, its ability
to finance current operations and growth initiatives, trends in its industry,
regulatory or legal developments, capital projects and rate adjustments.
Actual results could differ materially because of factors such as the
decisions of governmental and regulatory bodies, including decisions to raise
or lower rates; the timeliness of regulatory commissions’ actions concerning
rates; changes in laws, governmental regulations and policies, including
environmental, health and water quality, and public utility regulations and
policies; weather conditions, patterns or events, including drought or
abnormally high rainfall; changes in customer demand for, and patterns of use
of, water, such as may result from conservation efforts; the company’s ability
to effect significant changes to its business processes and corresponding
technology; its ability to appropriately maintain current infrastructure and
manage the expansion of its business; its ability to obtain permits and other
approvals for projects; delays in project completion; changes in its capital
requirements; its ability to control operating expenses and to achieve
efficiencies in its operations; its ability to obtain adequate and
cost-effective supplies of chemicals, electricity, fuel, water and other raw
materials that are needed for its operations; its ability to successfully
acquire and integrate water and wastewater systems that are complementary to
its operations and the growth of its business or dispose of assets or
regulatory systems that the company determined should no longer be part of its
portfolio; cost overruns relating to improvements or the expansion of its
operations; changes in general economic, business and financial market
conditions; access to sufficient capital on satisfactory terms; fluctuations
in interest rates; restrictive covenants in or changes to the credit ratings
on the company’s current or future debt that could increase its financing
costs or affect its ability to borrow, make payments on debt or pay dividends;
fluctuations in the value of benefit plan assets and liabilities that could
increase its cost and funding requirements; migration of customers into or out
of its service territories; difficulty in obtaining insurance on acceptable
terms and conditions; its ability to retain and attract qualified employees;
the incurrence of impairment charges; labor actions including work stoppages
and strikes; and civil disturbance, 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 other SEC filings. The company undertakes no duty to update any
forward-looking statement.

                                                           
American Water Works Company, Inc. and Subsidiary Companies
                                                                 
Consolidated Statements of Income (Unaudited)
In thousands except per share data
                                                                 
                                                                 
                     Three Months Ended          Nine Months Ended
                     September 30,               September 30,
                     2012          2011          2012            2011
                                                                 
                                                                 
Operating revenues   $ 831,815    $ 760,869    $ 2,195,976    $ 2,026,457 
                                                                 
Operating expenses
Operation and          355,126       340,339       992,707         978,317
maintenance
Depreciation and       96,219        88,323        280,652         262,543
amortization
General taxes          52,861        52,433        165,264         160,882
(Gain) loss on        (31     )    (1,635  )    (657      )    (1,339    )
sale of assets
Total operating       504,175     479,460     1,437,966     1,400,403 
expenses, net
                                                                 
Operating income      327,640     281,409     758,010       626,054   
                                                                 
Other income
(expenses)
Interest, net          (76,616 )     (78,562 )     (236,000  )     (233,222  )
Allowance for
other funds used       3,735         3,696         13,173          9,059
during
construction
Allowance for
borrowed funds         1,548         1,586         5,942           3,988
used during
construction
Amortization of        (1,322  )     (1,251  )     (3,949    )     (3,798    )
debt expense
Other, net            39          12          (242      )    (463      )
Total other income    (72,616 )    (74,519 )    (221,076  )    (224,436  )
(expenses)
                                                                 
Income from
continuing             255,024       206,890       536,934         401,618
operations before
income taxes
Provision for         100,913     78,395      216,908       157,607   
income taxes
Income from
continuing             154,111       128,495       320,026         244,011
operations
Income (loss) from
discontinued          (299    )    8,927       (17,434   )    754       
operations, net of
tax
Net income           $ 153,812    $ 137,422    $ 302,592      $ 244,765   
                                                                 
Basic earnings per
common share: (1)
Income from
continuing           $ 0.87       $ 0.73       $ 1.81         $ 1.39      
operations
Income (loss) from
discontinued          -           0.05        (0.10     )    -         
operations, net of
tax
Net income           $ 0.87       $ 0.78       $ 1.72         $ 1.39      
                                                                 
Diluted earnings
per common share:
(1)
Income from
continuing           $ 0.87       $ 0.73       $ 1.80         $ 1.38      
operations
Income (loss) from
discontinued          -           0.05        (0.10     )    -         
operations, net of
tax
Net income           $ 0.86       $ 0.78       $ 1.70         $ 1.39      
                                                                 
Average common shares
outstanding during the period:
Basic                 176,621     175,547     176,290       175,426   
Diluted               177,841     176,593     177,486       176,422   
                                                                 
Dividends per        $ 0.25       $ 0.23       $ 0.73         $ 0.90      
common share
                                                                 
(1) Amounts may
not sum due to
rounding
                                                                 

                                                               
American Water Works Company, Inc. and
Subsidiary Companies
                                                                  
Condensed Consolidated Balance Sheet
Information (Unaudited)
In thousands
                                                                  
                                                                  
                                                  September 30,   December 31,
                                                  2012            2011
                                                                  
                                                                  
Cash and cash equivalents                         $  18,531       $ 14,207
Other current assets                                 623,994        453,594
Total property, plant and equipment                  11,534,327     11,021,098
Total regulatory and other long-term assets          2,422,683      2,357,634
Assets of discontinued operations                   -             929,858
Total Assets                                      $  14,599,535   $ 14,776,391
                                                                  
Short-term debt                                   $  297,859      $ 515,050
Current portion of long-term debt                    34,964         28,858
Other current liabilities                            673,051        562,979
Long-term debt                                       5,203,867      5,361,084
Total regulatory and other long-term                 2,946,441      2,719,070
liabilities
Contributions in aid of construction                 994,013        966,748
Liabilities of discontinued operations               -              382,218
Total stockholders' equity                          4,449,340     4,240,384
Total Capitalization and Liabilities              $  14,599,535   $ 14,776,391
                                                

                                                              
Regulated Operations and Maintenance
Efficiency Ratio (A Non-GAAP, unaudited
measure)
In thousands
                                                 Twelve Months Ended
                                                 September 30,
                                                 2012            2011
                                                                 
Total Operation and Maintenance Expenses         $ 1,316,184     $ 1,320,513
Less:
Operation and maintenance expenses-                280,366         271,308
Market-Based Operations
Operation and maintenance expenses- Other         (60,023   )    (64,499   )
Total Regulated Operation and Maintenance          1,095,841       1,113,704
Expense
Less: Regulated purchase water expense (a)        107,218       97,901    
Adjusted Regulated Operation and Maintenance     $ 988,623      $ 1,015,803 
Expenses
                                                                 
Total Operating Revenues                         $ 2,835,755     $ 2,652,230
Less:
Operating revenues - Market-Based Operations       333,216         321,044
Operating revenues - Other                        (21,485   )    (29,011   )
Total Regulated operating revenues                 2,524,024       2,360,197
Less: Regulated purchase water revenues (a)       107,218       97,901    
Adjusted Regulated Operating Revenues            $ 2,416,806    $ 2,262,296 
                                                                 
Regulated Operations and Maintenance               40.9      %     44.9      %
Efficiency Ratio
                                                                 
(a) Calculation assumes purchased water
revenues approximate purchased water expenses.
                                                                 

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Contact:

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