American Water Works (AWK)

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American Water Works Company, Inc. (AWK)

Q3 FY08 Earnings Call

November 6, 2008, 09:00 AM ET

Executives

Edward Vallejo - VP, IR

Donald L. Correll - President and CEO

Ellen C. Wolf - Sr. VP and CFO

Analysts

Ryan M. Connors - Boenning & Scattergood, Inc.

Debra Coy - Janney Montgomery Scott, LLC

Presentation

Operator

Good morning and welcome to American Water's 2008 Third Quarter Earnings Conference Call. As a remainder, this call is being recorded and also being webcast with companying slide presentation through the company's website www.amwater.com.

Following the earnings call, an audio archive of the call will be available at 11:00 AM Eastern Time today, by dialing 1-800-475-6701 for within the United States or Canada and 320-365-3844 from outside the U.S. or Canada. The pass code for replay participants is 955087. The call replay and online archive of the webcast will be available through November 7, 2008 by accessing the Investor Relations page of the company's website located at www.amwater.com.

At this time, all participants have been placed in a listen-only mode. Following managements prepared remarks we will then open the call for question. [Operator Instructions]. Today's call is scheduled for one hour and including the question-and-answer session. Participating on today's call from American Water are Donald L. Correll, President and Chief Executive Officer, Ellen C. Wolf, Senior Vice President and Chief Financial Officer and Edward Vallejo, Vice President of Investor Relations.

I would now like to introduce your host for today's call, Ed Vallejo, Vice President of Investor Relations. Mr. Vallejo, you may begin.

Edward Vallejo - Vice President, Investor Relations

Thank you. Good morning and welcome to American Water's 2008 third quarter earnings conference call. If you did not receive a copy of the earnings press release, you can find it by visiting our website at www.amwater.com.

Before we begin, let me remind you that in accordance with the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995, we are advising you that certain matters to be discussed by members of management during this call may constitute forward-looking statements. Such statements are subject to numerous risks, uncertainties and other factors that may cause the actual performance of American Water to be materially different from the performance indicated or implied by such statements. Such risk factors are set forth in company's SEC filing.

Today American Water's President and Chief Executive Officer Don Correll and Ellen Wolf, our Senior Vice President and Chief Financial Officer will be discussing our third quarter and year-to-date results. Following the presentation, we'll have our question-and answer-session.

Now I'd like to turn the call over to Don Correll.

Donald L. Correll - President and Chief Executive Officer

Thank you Ed and good morning everyone. Today we are going to be commenting on our third quarter as well as our year-to-date results reviewing some of the highlights and discussing important news for the quarter.

Before I begin with an overview of our key financial results, I'd like to address the recent market conditions. Although the country has seen fallout from the continuing economic downturn and resulting credit and investment scarcity, water utility like American Waters still need to provide a critical and basic service, while continuing to invest capital in the nation's water infrastructure.

As such, American Water continuously monitors the availability of capital in the financial markets, maintains an open dialogue with our banking advisors and regulators and is prepared to implement alternatives should credit scarcity or higher capital cost issues persist.

I'd also point out that as many municipalities across the country face amounting pressures also, forced to choose between funding for education, and safety and other local priorities or replacing water and waste water infrastructure. American Water may realize opportunities to assist them continuing to grow through tuck-in acquisitions or public/private partnerships as the capital market stabilize.

When you consider our size our national put print and the success we've had in the past helping communities, this is a relevant time for American Water to offer our expertise and experience to municipalities facing huge financial and infrastructure challenges.

Although Ellen will cover this in greater detail, I want to reiterate that we have adequate credit facilities in place today to continue to prudently invest in our infrastructure. That our credit ratings are stable and that our geographic diversity gives us the flexibility to plan prudent capital spending programs that enable us to deliver quality service to our customers and grow as the country works to ride its economic shift.

And despite the harsh stock market conditions, the American Water share prices outperformed both the Dow Jones and the S&P 500 industries since our IPO in April this sell through the third quarter and through the month of October as well.

Since RWE announced its intention to divest almost three years ago, we have been focused on improving our operating performance and our earnings. As a result, since that time, American Water has been methodically re-establishing the co-relation between net utility plan and net income that exist to prior RWE ownership.

Moving to the financial results; for the quarter, the company reported an operating revenue increase of 6.2% to approximately $672 million.

Net income was $88.2 million or $0.55 per share, compared with a loss of $160 million in the third quarter of 2007. Excluding the goodwill impairment charge, the third quarter 2007 net income would have been $79.5 million, showing approximately an 11% growth quarter-over-quarter.

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