American Water Works Company, Inc. Reports 5% Increase in Second Quarter Earnings.

VOORHEES, N.J.--(BUSINESS WIRE)--Aug. 5, 1999--

American Water Works Company, Inc. (NYSE:AWK) today reported record second quarter 1999 net income to common stock of $40.7 million, prior to one time merger costs for the recently completed acquisition of National Enterprises Inc. (NEI), compared with $38.6 million for 1998, an increase of 5 percent.

Basic and diluted earnings per common share for the quarter prior to one time merger costs were 42 cents, compared to 41 cents in the second quarter of 1998, an increase of 2 percent. The results presented this quarter and the restated results for 1998 reflect the pooling of interests method of accounting to recognize the recent acquisition of NEI.

Net income to common stock less one time merger expenses of $8.6 million after taxes was $32.1 million, or 33 cents per share on a pooled basis. Second quarter revenues increased 6 percent from $301 million in 1998 to $319 million this year, also on a pooled basis.

American Water Works Company President and Chief Executive Officer, J. James Barr, said "Increased revenues for the quarter resulted from increased water usage during extended periods of hot and dry summer weather experienced in a number of subsidiary service territories. American Water System subsidiaries' ability to meet the challenge of these high demands is enabled by investments in facilities with adequate capacity. The Company encourages customers to use the resource wisely, but prepares prudently to meet their needs. Also, ongoing customer growth and a rate increase for New Jersey-American Water Company early in the second quarter contributed to higher revenues."

Before one time merger costs, net income to common stock, year to date was $60.4 million compared with $61.3 million for the first six months of 1998. Adverse winter weather experienced at several subsidiaries in the first quarter contributed to increased costs resulting in lower net income to common stock for the year to date in 1999.

Basic and diluted earnings per share before one time merger costs were 63 cents, compared with 65 cents for the first six months of 1998. Net income to common stock, net of merger expenses of $8.8 million, for the first six months of 1999 was $51.6 million, or 54 cents per share.

Revenues for the first six months of 1999 were $596 million, up 5 percent from 1998. All year to date results are also presented on a basis of the pooling of interests method of accounting.

On June 25, 1999, American Water Works Company announced the completion of the acquisition of NEI, a holding company whose water utilities provide water service to approximately 1.7 million people in Missouri, Indiana, Illinois and New York. The expenses for the merger were anticipated in the purchase price.

Also reflected in the results for the second quarter are $1.8 million in after tax expenses for the efforts of two subsidiaries defending condemnation initiatives by municipalities in their respective service territories.

For purposes of comparison, results for American Water Works Company exclusive of the merger were calculated. Pre-merger net income to common stock for American Water Works Company for the quarter would have been a record $35.8 million, compared with $34.1 million for 1998, an increase of 5 percent. Pre-merger earnings per share for the quarter would have been 44 cents, versus 42 cents in 1998.

Barr noted that "While the merger expenses had a significant impact on the results of this quarter, these expenses were one time charges and were expected. We are pleased that we were able to complete this acquisition earlier than we had expected and we are now well positioned for further growth in the Midwest. An excellent example of this point is the recently signed agreement to acquire the regulated subsidiaries of United Water Resources in Missouri, Illinois, Indiana and Virginia, three of which are states where NEI subsidiaries were recently acquired."

American Water Works Company is the largest and most geographically diverse investor-owned water utility business in the United States. The Company's utility subsidiaries and affiliates serve approximately 10 million people in 23 states.

The Company remains committed to continued growth and is involved in a number of industry consolidation and privatization initiatives including water and wastewater system acquisition, contract operation and public/private partnerships.

The Company's prepared comments for the earnings review conference call with analysts will be available on the Company's website (www.amwater.com) after 1:00 PM today. A transcript of the conference call, including questions and answers, will be posted as soon as it is available.

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; availability, terms and development of capital; business abilities and judgment of personnel; changes in, or the failure to comply with governmental regulations; and Year 2000 issues.

For the three, six and 12 month periods ended June 30, American Water Works Company, Inc. reported unaudited consolidated revenues and income as follows: -0-

                Three Months        Six Months        Twelve Months
                   Ended              Ended               Ended
                  June 30,           June 30,            June 30,
               1999     1998      1999     1998      1999     1998
               ----     ----      ----     ----      ----     ----
(In thousands,
 except per
 share amounts)
----------------------------------------------------------------------
Operating
 revenues  $318,975 $301,156  $596,391 $566,445  $1,229,982 $1,165,239
----------------------------------------------------------------------

Net income
 before
 one-time
 merger
 costs      $41,756  $39,612   $62,356  $63,309    $149,805   $145,069

Merger
 costs (net
 of tax)      8,634        0     8,812        0       9,131          0

Net income
 after
 merger
 costs       33,122   39,612    53,544   63,309     140,674    145,069

Dividends on
 preferred
 stock          996      996     1,992    1,992       3,984      3,984
----------------------------------------------------------------------

Net income
 to common
 stock      $32,126  $38,616   $51,552  $61,317    $136,690   $141,085
----------------------------------------------------------------------

Average shares
 of basic stock
 outstanding
 (in
 thousands)  96,341   95,111    96,125   94,932      95,826     94,660

Basic earnings
 per common
 share on
 average
 shares
 outstanding   $.33     $.41      $.54     $.65       $1.43      $1.49

Diluted earnings
 per common
 share on
 average
 shares
 outstanding   $.33     $.41      $.54     $.65        $1.43     $1.49
----------------------------------------------------------------------

Diluted earnings
 per common
 share on
 average
 shares
 outstanding
 prior to
 merger costs  $.42     $.41      $.63     $.65        $1.52     $1.49
----------------------------------------------------------------------