American Water Works (AWK) Financial History

Members of our management and our Board of Directors have interests in the proposed Essential merger that may be different from, or in addition to, their interests as our shareholders.

Our Code of Ethics requires employees, members of our Board of Directors and contractors to make decisions ethically and in compliance with applicable law and regulatory requirements, and our Code of Ethics and its un…

Parent company is a holding company and, as such, it has no substantive operations of its own.

In June 2023, American Water Capital Corp., our wholly owned finance subsidiary (“AWCC”), issued $1,035 million aggregate principal amount of Notes.

Given our usage of long-term debt as a key component of our capital and investment strategy, one of the principal market risks to which the Company is exposed is changes in interest rates.

As of December 31, 2025, our aggregate long-term and short-term debt balance (including preferred stock with mandatory redemption requirements) was $15.8 billion, and our working capital (defined as current assets les…

A significant part of our long-term strategic plan focuses on safety, operational excellence, cost and expense efficiency (including O&M expense efficiency), water quality and affordability, asset and capital manageme…

Although in the past we have been generally able to obtain insurance coverage related to our business, there can be no assurance that we can continue to be able to secure all necessary or appropriate insurance in the…

We maintain insurance coverage, some of which may be self-insured, as part of our overall legal and risk management strategy to minimize potential liabilities arising from our operations.

Laws and regulations are changing and increasing rapidly with respect to data and consumer privacy, security and protection.

We have obtained insurance to provide coverage for a portion of the losses and damages that may result from a physical attack, cyber attack or a security breach, but such insurance is subject to a number of exclusions…

While we believe that we have appropriate security measures and safeguards to protect our operational and information technology systems, the cybersecurity incident that we experienced in October 2024 demonstrated tha…

As owners and operators of critical infrastructure, we face a heightened risk of physical attack and cyber attacks from internal or external sources, including nation-state cyber actors.

The properties of our Regulated Businesses segment include 75 dams, the majority of which are earthen dams.

•increasing the costs and/or difficulty of complying with proposed changes to federal contracting regulations and contractor affirmative action audits;

Because of the uncertainty of weather volatility related to climate variability, we cannot predict the potential impact on our business, financial condition, results of operations, cash flows and liquidity.

Our water and wastewater operations are subject to extensive federal, state and local laws and regulations.

Additional Risks Related to Our Business

•Regulatory and environmental risks associated with the collection, treatment and disposal of wastewater may impose significant costs and liabilities, and aging infrastructure may require increased capital and O&M spe…

•The current regulatory rate setting process may result in a significant delay, also known as “regulatory lag,” from the time that we invest in infrastructure improvements, incur increased operating expenses, incur in…

•Our operations and the water we supply are subject to environmental, water quality and health and safety laws and regulations, including contaminants of emerging concern, compliance with which could impact our operat…

•Our Regulated Businesses are subject to regulation by PUCs and other regulatory agencies, which affects our business, financial condition, results of operations and cash flows, and may be subject to fines, penalties…

failure or inability of any of these subsidiaries to pay such dividends or repay intercompany obligations could have a material adverse impact on our liquidity and parent company’s ability to pay dividends on its comm…

We may sustain losses that exceed or are excluded from our insurance coverage or for which we are self-insured.

While we believe that we have appropriate security measures and safeguards to protect our operational and information technology systems, the recent cybersecurity incident that we experienced in October 2024 demonstra…

customers and could adversely affect our financial condition and results of operations.

to discontinue operations and sell our operating assets to another utility or to a municipality.

Parent company provides performance guarantees with respect to certain of the obligations of our Other businesses (primarily MSG), including financial guarantees or deposits, which may adversely affect parent company…

Additional Risks Related to Other Businesses

Because we and Essential, and each of their respective subsidiaries, are significantly regulated in the United States, the two companies have been and will continue to be affected by U.S.

The proposed Essential merger will combine companies that are affected by developments in the water and wastewater utility industries and, additionally, with respect to Essential, the natural gas industry, including c…

In addition, the success of the Essential merger will depend, in part, on the ability of the combined company to successfully execute its business strategy.

Following the completion of the Essential merger, the size of the combined company’s business will be significantly larger than the current size of either our or Essential’s respective businesses.

The future results and market value of the combined company may be adversely impacted if the combined company does not effectively manage its expanded operations following the completion of the merger or the combined…

The completion of the Essential merger may trigger change in control or other provisions in certain agreements to which we or Essential or their respective subsidiaries are a party.

Completion of the Essential merger may trigger change in control or other provisions in certain agreements to which we or Essential or their respective subsidiaries are a party, which may have an adverse impact on the…

Members of our management and our Board of Directors have interests in the proposed Essential merger that may be different from, or in addition to, those of other shareholders.

Parent company has reserved for issuance shares of its common stock to be issued in the proposed Essential merger (including shares of parent company common stock issuable pursuant to the proposed treatment of Essenti…

Current shareholders will have reduced ownership and voting interests after the proposed Essential merger.

We expect to incur substantial non-recurring expenses associated with completing the proposed Essential merger, as well as expenses related to combining the operations of the two companies.

We may incur substantial and/or unexpected transaction fees and merger-related costs in connection with the proposed Essential merger.

•we may fail to receive upstream dividend payments from our subsidiaries in the same amount that we have historically, and the ability of our subsidiaries to do so is subject to various risks and uncertainties describ…

•the amount of quarterly dividends that we may pay to shareholders is subject to restriction under Delaware law and compliance with our stated dividend payment policy and strategy; and

•our Board of Directors may decide not to declare and pay quarterly dividends in accordance with historical practice or our stated dividend strategy, or at all;

•a lack of cash to pay such dividends, due to changes in our cash requirements, capital spending plans, financing agreements, cash flow or financial position;

Our shareholders have no contractual or other legal right to dividends that have not been declared.

We cannot assure that we will be able to continue paying quarterly dividends at the current rate, or to propose and/or maintain future quarterly dividend increases as planned.

In accordance with applicable accounting standards in the United States related to business combinations, we believe that the proposed Essential merger will be accounted for as an acquisition of Essential’s common sto…

If the proposed Essential merger is completed, we may be required to record goodwill or we may acquire other assets measured and recorded at fair value, and, thereafter, we may be required to record impairments to the…

The combined company’s assets, liabilities, business, financial condition, cash flows, and operating results, as well as its business strategies and prospects, could be adversely affected before or after the closing o…

The combined company’s financial condition, results of operations and cash flows could be adversely affected by unknown or unexpected events, conditions or actions that occur prior to the closing of the proposed Essen…

We currently anticipate that the proposed Essential merger will be accretive to our earnings per share in 2028, the first full year following the completion of the proposed merger.

The proposed Essential merger may not be accretive to our earnings and may adversely affect our earnings per share, which may negatively affect the market price of our common stock.

It is possible that the integration process could take longer than anticipated and could result in the loss of valuable employees, the disruption of each company’s ongoing businesses, processes and systems or inconsis…

•the effect of any government regulations which relate to Essential’s business, including with respect to jurisdictions in which our Regulated Businesses currently do not operate.

•the potential inability to manage an increased number of locations and employees; and

•the potential impairment of relationships with employees and partners as a result of any integration of new management personnel;

•difficulties in establishing and/or maintaining uniform standards, systems, controls, procedures and policies, including accounting and financial reporting, across both of the integrated companies, or merging or link…

•risks related to owning, operating, maintaining and successfully managing Essential’s natural gas distribution business, including any increased risks and liabilities associated with the operation of that business;

•changes in our business focus and/or management;

•the potential disruption of the ongoing businesses and distraction of our and Essential’s management;

•unforeseen or significant difficulties in integrating the two companies and their assets, operations, cultures and employees;

We could have difficulty integrating the acquired assets, personnel and operations with our own.

We entered into the Essential Merger Agreement with the expectation that the proposed Essential merger will result in various benefits, including, among other things, increased efficiencies of scale and size, increase…

If completed, the proposed Essential merger may not achieve its anticipated results, and we may be unable to integrate Essential’s operations and/or operate the combined company in the manner expected.

Securities class action lawsuits, derivative lawsuits, and lawsuits seeking to enjoin the proposed Essential merger are often brought against companies that have entered into a merger agreement.

We may be the target of securities class action and derivative lawsuits which could result in substantial costs and may delay or prevent the proposed Essential merger from being completed.

Under the Essential Merger Agreement, we and Essential are each restricted, subject to limited exceptions, from entering into certain alternative transactions in lieu of the proposed Essential merger, including, among…

The Essential Merger Agreement contains provisions that limit our ability to pursue certain alternatives to the proposed Essential merger, which could discourage a potential acquirer from making an alternative transac…

The proposed Essential merger will be completed only if stated conditions are satisfied, including the receipt of the requisite regulatory and other approvals, among other conditions.

The proposed Essential merger may cause suppliers, strategic partners, certain customers or others to delay or defer decisions regarding our business, and may adversely affect our ability to effectively manage our bus…

•the price of parent company’s common stock may decline to reflect assumptions by the market as to whether the proposed merger will be completed.

•we will have been subject to certain restrictions on the conduct of our ongoing businesses, which may have prevented us from making certain acquisitions or dispositions or pursuing certain business opportunities whil…

•not pursuing other strategic transactions that we may have otherwise considered had we not entered into the Essential Merger Agreement with Essential;

•diversion of management’s attention from day-to-day operations;

•having to pay certain significant costs relating to the proposed merger without receiving the benefits of the proposed merger, including, in certain circumstances, a payment by us to Essential of a termination fee of…

We cannot provide any assurance that all of the required consents, orders and approvals will be obtained or that these consents, orders or approvals will not be conditioned on terms, conditions or restrictions that wo…

We anticipate that, subject to the receipt of all required regulatory and other consents and approvals and the satisfaction or waiver of all other closing conditions, the Essential merger will be completed in the firs…

The proposed Essential merger is subject to various closing conditions, including the receipt of consents and approvals from various governmental and regulatory entities and third parties, and a failure to obtain all…

Upon completion of the proposed Essential merger, each outstanding share of Essential common stock will be converted into the right to receive 0.305 shares of parent company common stock.

The market price of shares of parent company’s or Essential’s common stock will fluctuate and the exchange ratio will not be adjusted to reflect such fluctuations, and as a result, the consideration at the date of the…

We have a significant amount of goodwill and other assets measured and recorded at fair value on a recurring basis, and we may be required to record impairments or changes in fair value to these assets, which may nega…

Parent company may be unable to meet its ongoing and future financial obligations and to pay dividends on its common stock if its subsidiaries are unable to pay upstream dividends or repay funds.

The conditional exchange feature of the Exchangeable Notes, if triggered, may adversely affect our liquidity and financial condition and may dilute the ownership interest of our shareholders or may otherwise depress t…

Our issuance of common stock pursuant to a forward sale agreement upon physical settlement or net share settlement thereof will have a dilutive effect on our earnings per share.

Our shareholders may experience dilution as a result of the issuance of shares upon physical or net share settlement of the forward sale agreements, which may impact our earnings per share and the book value and fair…

If we institute or consent to, or an appropriate regulatory or other authority institutes against us, a proceeding seeking a judgment in bankruptcy or insolvency or any other relief under any bankruptcy or insolvency…

In certain bankruptcy or insolvency events, the forward sale agreements will automatically terminate, and we would not receive the expected proceeds from the forward sales of our common stock.

The forward sale price that we expect to receive upon physical settlement of the forward sale agreements is subject to adjustment on a daily basis based on a floating interest rate factor equal to the overnight bank f…

settlement of the relevant forward sale agreement.

In addition, the purchase of shares of our common stock in connection with the relevant forward purchaser or its affiliate unwinding its hedge positions could cause the market price of our common stock to increase ove…

Each forward sale agreement provides for settlement on a settlement date or dates to be specified at our discretion on or prior to December 31, 2026.

A forward purchaser’s decision to exercise its right to accelerate a forward sale agreement to which it is a party (or, in certain cases, the portion thereof that it determines is affected by the relevant event) will…

•certain other events of default or termination events occur, including, among other things, any material misrepresentation made by us in connection with our entry into a forward sale agreement, our bankruptcy (except…

•an event is announced that, if consummated, would result in an extraordinary event (as defined in the forward sale agreements), as well as certain events such as a delisting of our common stock (each as more fully de…

•certain ownership thresholds applicable to such forward purchaser are exceeded;

•we declare any dividend or distribution on shares of our common stock payable in (i) cash in excess of a specified amount (other than an extraordinary dividend), (ii) securities of another company, or (iii) any other…

• in the good faith, commercially reasonable judgment of such forward purchaser, it or its affiliate is unable to borrow a number of shares of our common stock equal to the number of shares to be delivered by us upon…

In August 2025, we entered into forward sale agreements with each of Wells Fargo National Bank, National Association, JPMorgan Chase Bank, National Association, and Mizuho Markets Americas LLC, each as forward purchas…

Settlement provisions contained in our forward sale agreements subject us to risks if certain events occur, which could have an effect on our results of operations and liquidity, and could cause the price of our commo…