American Water Works Co. reports 11% earnings growth in second quarter

American Water Works Company, Inc. today reported growth of 11% in earnings per share for the second quarter 2001. Net income to common stock for the quarter was $49.2 million, compared with $44.1 million reported for last year's second quarter.

VOORHEES, N. J., July 30, 2001 — American Water Works Company, Inc. today reported growth of 11% in earnings per share for the second quarter 2001. Net income to common stock for the quarter was $49.2 million, compared with $44.1 million reported for last year's second quarter.

Per share earnings for the quarter increased from 45 cents to 50 cents. The second quarter's results brought earnings per share to 73 cents for the first six months of 2001, compared with the 72 cents per share reported for the first six months of 2000.

The company reported that $2 million of its second quarter earnings, or two cents per share resulted from selling a portion of its telecommunication company investments.

Revenues for the quarter increased $18 million, or 5%, to $364 million from the $346 million reported for the same quarter last year. Increased revenues were the result of increased water sales to 44,000 new customers added since June 30, 2000 and authorized increases in charges for water service.

Operation and maintenance (O&M) expenses for the quarter increased 4% compared with O&M expenses for the same quarter last year. A portion of the expense increase was associated with customer growth. Per customer O&M expenses for the quarter and on a rolling twelve-month basis were up less than 21/2 % from expense levels one year ago.

"The system-wide consolidation of our customer service and business functions moved forward during the quarter, but the longer-range positive impact on expenses will not be fully realized until the transition period is completed," said Chief Financial Officer Ellen C. Wolf.

By the end of 2001, more than 1.5 million customers, or about 60% of the company's customer base, will begin to receive service from a new customer service center in Alton, Illinois. At the same time, a significant portion of the company's business functions will be handled centrally from a new, shared service facility in Mt. Laurel, New Jersey. All customers will be served by the new customer service center by the end of next year, and the project to consolidate business functions will be completed during the second quarter of that year. "We see these key changes as powerful drivers that will increase our productivity, improve our responsiveness to our customers, and create shareholder value," Wolf added.

Increases in depreciation and interest expenses comprised the majority of the remaining income statement changes and were principally the result of capital investments made since June 30, 2000 to build necessary utility facilities.

During the second quarter, an order was received from the Illinois Commerce Commission approving the company's proposed purchase of water and wastewater assets owned by Citizens Communications (NYSE:CZN) in that state. Five states have now given regulatory approval to American Water Works' proposed 300,000-customer, six-state acquisition of Citizens' water and wastewater assets. Approval from the California Public Utilities Commission is anticipated in September 2001.

The company noted that the Citizens acquisition is only one example of the continued implementation of its growth strategy and industry consolidation. Seven additional acquisitions have been completed in 2001 alone, adding more than 18,000 new customers to the company's service areas. In addition to the Citizens transaction, acquisitions of utility systems serving 25,000 customers are pending completion. This total includes 8,500 customers now served by a municipally owned water system in Missouri that the company recently announced it has agreed to acquire.

American Water Works Company is a publicly traded enterprise devoted to the water and wastewater business.

More information can be found on the company's website (http://www.amwater.com).

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