Earnings impacted by lower industrial sales, recent acquisitions
American Water Works Company, Inc. (NYSE:AWK) today reported first quarter net income to common stock of $17.7 million
compared to $23.3 million for the same quarter in 2001. As a consequence, earnings per share (EPS) declined to 18 cents for
the first three months versus 24 cents during the same period last year. Included in EPS for the first quarter of 2002 is
three cents for the cumulative effect of the adoption of new financial accounting standards associated with business combinations
and a six cent impact associated with various acquisition activities.
Total consolidated revenues for the quarter grew by 22% over the first quarter 2001 to $385 million. Increased revenues
are the result of the addition of more than 330,000 customers, added revenues from unregulated businesses, and rate increases
in various jurisdictions.
Overall 1Q Performance
First quarter 2002 results were influenced by lingering weak economic conditions that continued to force industrial water
use downward - especially in the Midwestern states the Company serves. During the quarter, water sales to industrial customers
declined by one billion gallons, or 10%, in comparison with the same period last year. This continues a trend experienced
by the Company throughout the latter half of 2001.
Water restrictions in several Eastern states also contributed to lower per-customer water sales during the period. The
Company reported that if drought conditions persist and current restrictions remain in effect into the second and third quarters,
when water sales are traditionally highest, earnings per share will be further impacted. Results were negatively impacted
$2 million or two cents a share by a shift in the Company's business model with the November 2001 acquisition of Azurix North
America Corp. and Azurix Industrials Corp. Revenues and net income from key components of this business, such as the residuals
market, are more seasonal in nature and will be more fully realized during the second and third quarter of this year.
As previously reported, in January 2002 the Company completed the acquisition of the water and wastewater assets of Citizens
Communications Company. Results for first quarter 2002 for the acquired Citizens utilities was a loss of $3 million or three
cents a share. This result includes interest expense associated with the debt to finance the acquisition and depreciation
on the fair value of the property in excess of its original cost. The Company previously reported that this acquisition is
expected to be accretive to net income within 12 to 18 months, following rate increases needed to reflect investments in utility
plant.
The Company incurred expenses of one cent a share during the first quarter related to the RWE transaction and the regulatory
approval process, and expects these expenses to continue throughout the year.
April 2002 Activity
On April 25, the Company completed the divestiture of its New England subsidiaries to the Aquarion Company for $243 million
including a cash payment of $120 million and the buyer's assumption of $125 million in debt. This transaction furthers the
Company's strategy to advance the consolidation of the water and wastewater industry while creating benefits for customers
and shareholders.
Earlier in the month, the Company tendered approximately 2.2 million shares of the 3.5 million shares of ITC Holding Company's
common stock it acquired as part of the acquisition of National Enterprise Inc. The sale, which was carried out through ITC
Holding Company's repurchase program, resulted in a $13 million after-tax gain that will be reflected in second quarter 2002
results.
Investment Community Communications
The Company will host a conference call with the investment community at 3 PM (EDT) today to discuss its financial results
for the quarter. Interested parties may listen to the call by logging onto the American Water Works website at www.amwater.com.
A telephone playback of the conference call will be available for one week after 5 PM today and can be heard by dialing 1-800-633-8284
and providing reservation number 20502047.
About American Water Works
American Water Works Company is the largest publicly traded US corporation devoted exclusively to the business of water.
Its 6,600 associates provide water, wastewater and other related services to more than 15 million people in 29 states and
three Canadian provinces. More information can be found on the web at www.amwater.com.
Forward looking statements in this report, including, without limitation,
statements relating to the Company's plans, strategies, objectives, expectations, intentions and adequacy of resources, are
made pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward looking
statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance
or achievements of the Company to be materially different from any future results, performance or achievements expressed or
implied by such forward looking statements. These factors include, among others, the following: the success of pending applications
for rate increases, inability to obtain, or to meet conditions imposed for, regulatory approval of pending acquisitions, weather
conditions that tend to extremes of temperature or duration; availability, terms and development of capital; business abilities
and judgment of personnel; changes in, or the failure to comply with governmental regulations, particularly those affecting
the environment and water quality; competition; success of operating initiatives, advertising and promotional efforts; existence
of adverse publicity or litigation; changes in business strategy or plans; quality of management; general economic and business
conditions; the ability to satisfy the conditions to closing set forth in the definitive agreement; and other factors described
in filings of the Company with the SEC. The Company undertakes no obligation to publicly update or revise any forward looking
statement, whether as a result of new information, future events or otherwise.
