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American Water Reports Solid First Quarter 2012 Results

Market-Based Operations

American Water’s Market-Based Operations’ revenues increased by $5.2 million during the first quarter of 2012. The increase was primarily attributable to its contracts to provide water and wastewater services for military bases. The Market-Based Businesses’ O&M expenses during the first quarter increased by $3.2 million over the comparable quarter, reflecting the increases in revenue.

Quarterly Dividend

On March 1, 2012, the company paid a cash dividend of $0.23 per common share to shareholders of record as of February 3, 2012.

On February 24, 2012, American Water’s Board of Directors declared a quarterly cash dividend of $0.23 per common share, payable on June 1, 2012 to all shareholders of record as of April 20, 2012.

Earnings Guidance

The company’s 2012 earnings from ongoing operations are estimated to be in the range of $1.90 to $2.00 per share. 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 December 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 impairment charges and estimated revenues and expenses related to purchased water.

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