American Water Works Company, Inc. Reports 1999 Net Income of $148 Million.

Business Editors

VOORHEES, N.J.--(BUSINESS WIRE)--Feb. 3, 2000

American Water Works Company, Inc. (NYSE:AWK) today announced net income to common stock of $148 million for 1999, excluding the one-time merger costs incurred to complete the acquisition of National Enterprises Inc. (NEI).

Net income to common stock for 1998 totaled $147 million. Diluted earnings per common share for the year, excluding one-time merger costs, were $1.53, compared to $1.54 per common share in 1998. Net income to common stock, including the one-time merger costs, was $135 million, or $1.40 per common share.

These results for 1999 do not reflect the increase in the value of investments in two telecommunications firms acquired in the merger with National Enterprises Inc. (NEI).

The after tax unrealized gains on these telecommunications firms' securities added $59 million, or the equivalent of $0.61 per share, to the Company's comprehensive income in 1999. Revenues for the year increased to $1.261 billion, a 5 percent increase over 1998 revenues of $1.200 billion.

American Water Works Company President and Chief Executive Officer J. James Barr said, &uot;The Company achieved solid financial performance in 1999 given the circumstances we encountered. We incurred costs totaling $3.6 million after tax or $0.04 per share to successfully prevent an unwelcome takeover of one of our subsidiaries. Those costs combined with incremental expenses in the first quarter due to severe winter weather conditions, usage limitations imposed by state government during the summer for several subsidiaries and additional one time costs associated with contract management activities all combined to adversely impact results for the year.&uot;

Barr also said, &uot;At midyear 1999 we completed the merger with National Enterprises Inc. which increased the Company's geographic diversity. Had this transaction not been completed at that time, the usage restrictions imposed on several subsidiaries would have had even greater adverse impact. In October we announced that agreements had been reached to acquire the water and wastewater assets of Citizens Utilities, and the common stock of SJW Corp. These transactions will be completed late in the year 2000. In view of these acquisitions and continued normal internal growth we remain as optimistic as ever about the prospects for continued gains in long term value for both shareholders and customers.&uot;

For the fourth quarter of 1999, net income to common stock was $31.6 million, compared to $32.5 million for the fourth quarter of 1998. Diluted earnings per common share for the fourth quarter were $0.33 per common share, compared with the prior year's $0.34 per common share. Revenues for the fourth quarter increased 4 percent over the prior year's fourth quarter.

American Water Works Company is the largest and most geographically diverse investor-owned water utility business in the U.S. The Company's utility subsidiaries and affiliates serve approximately 10 million people, or 2.5 million customers, in 23 states.

Upon completion of the acquisition of Citizens' water and wastewater assets and the merger with SJW Corp., American Water Works Company, through its affiliates will serve over 12 million people, or 3 million customers.

A script of the Company's quarterly conference call with analysts will be posted on the website www.amwater.com at 3:00 PM Eastern today.

This release may contain certain forward looking statements involving known and unknown risks, uncertainties and other factors which 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: general economic and business conditions; competition; success of operating initiatives, advertising and promotional efforts; existence of adverse publicity or litigation; changes in business strategy or plans; quality of management; business ability and judgement of personnel; availability, terms and development of capital; and changes in, or the failure to comply with governmental regulations.

For the three and 12 month periods ended December 31, American Water Works Company, Inc., on a combined basis with newly acquired company National Enterprises Inc. (NEI), reported consolidated revenues and income as follows:

                       Three Months Ended        12 Months Ended
                       ------------------       ---------------
                      December 31, (unaudited)     December 31,
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(In thousands, except   1999       1998          1999        1998
per share amounts)
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Operating revenues    $310,888   $300,077    $1,260,857   $1,200,037
======================================================================
Net income before
  merger costs         $32,558    $33,882      $151,854     $150,791

Merger costs
 (net of tax)                -        339        12,905          352
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Net income after
 merger costs           32,558     33,543       138,949      150,439

Dividends on
 preferred stocks          996        996         3,984        3,984
----------------------------------------------------------------------
Net income to common
 stock                  31,562     32,547       134,965      146,455
----------------------------------------------------------------------
Other comprehensive
 income

Unrealized gains on
 securities             28,053     16,239       102,604       47,083
Income taxes on other
  comprehensive income (13,804)    (5,930)      (43,281)     (17,959)
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Net other comprehensive
   income               14,249     10,309        59,323       29,124
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Comprehensive income   $45,811    $42,856      $194,288     $175,579
======================================================================
Average shares of
 basic stock
 outstanding
 (in thousands)         97,071     95,684        96,544       95,234
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Basic and diluted
 earnings per common
 share on average
 shares outstanding (a)   $.33       $.34         $1.40        $1.54

Diluted earnings per
 common share on
 average shares
 outstanding excluding
 one time merger
 costs (a)                $.33       $.34         $1.53        $1.54
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(a) Excludes comprehensive income