AWK 10-K & 10-Q changes, risk factors and insider trading

Our operations and the quality of water we supply and wastewater we treat are subject to extensive and increasingly stringent environmental, water quality and health and safety laws and regulations, including with respect to contaminants of emerging concern, compliance with which could impact both our operating costs and capital expenditures, and violations of which could subject us to substantial liabilities and costs, as well as damage to our reputation.

Our water and wastewater operations are subject to extensive federal, state and local laws and regulations. These requirements include, among others, CERCLA, the Clean Water Act, the Safe Drinking Water Act, the LCR (as amended), and each of their implementing rules and regulations, as well as other federal and state requirements. For example, PUCs and environmental regulators set conditions and standards for the water and wastewater services we deliver. We are also required to obtain various environmental permits from regulatory agencies for our operations. If the water or wastewater services we provide to our customers do not comply with regulatory standards, or otherwise violate environmental laws, regulations or permits, or other health and safety and water quality regulations, we could incur substantial fines, penalties or other sanctions or costs, as well as damage to our reputation, as a result of governmental proceedings and private litigation. In the most serious cases, regulators could reduce requested rate increases or force us to discontinue operations and sell our operating assets to another utility or to a municipality. Given the nature of our business which, in part, involves providing water service for human consumption, any potential non-compliance with, or violation of, environmental, water quality and health and safety laws or regulations would likely pose a more significant risk to us than to a company not similarly involved in the water and wastewater industry. In addition, CERCLA authorizes the EPA to issue orders and bring enforcement actions to compel responsible parties to investigate and take remedial actions with respect to actual or threatened releases of hazardous substances, and can impose joint and several liability, without regard to fault, on responsible parties for the costs thereof. In addition, in April 2024, the EPA issued a final rule designating PFOA and PFOS as hazardous substances under CERCLA. While the EPA has stated that it will focus on holding responsible under CERCLA entities that significantly contributed to the release of PFAS into the environment, it is not yet known whether or to what extent liability protection will be afforded to passive receivers of PFAS, including water and wastewater utilities. In September 2025, the EPA reaffirmed this enforcement approach, explaining that, while it intends to focus CERCLA enforcement activities on entities that significantly contributed to PFAS releases and generally does not plan to pursue actions against passive receivers, its enforcement discretion does not alter CERCLA’s underlying liability framework or restrict private party claims, and therefore the extent to which we may be subject to future CERCLA liability for PFAS-related claims remains uncertain. Furthermore, both federal and state laws and regulations have been enacted or proposed that seek to reduce or limit GHG emissions and/or require or would require additional reporting, monitoring and disclosure of, among other things, GHG emissions and related financial risks, and these regulations may become more pervasive or stringent in light of changing governmental agendas and priorities, although the exact nature and timing of these changes is uncertain.

We incur substantial operating and capital costs on an ongoing basis to comply with environmental, water quality and health and safety laws and regulations. These laws and regulations and their enforcement,enforcement have become more stringent over time, and new or stricter requirements, such as the final EPA drinking water regulations for PFAS, the LCRR and the recently implementedpromulgated LCRI, are expected to increase our costs. For example, the designation of PFOA and PFOS as hazardous substances under CERCLA may impact our abilityapproach to how we dispose of material usedrelated to treattreatment at impacted systems and may increase our costs as a result. Although we may seek to recover ongoing compliance costs in our Regulated Businesses through customer rates, and certain jurisdictions in which our Regulated Businesses operate have passed laws authorizing recovery of such costs, there can be no guarantee that the various other regulatory PUCs or similar regulatory bodies that govern our Regulated Businesses would approve rate increases that would enable us to recover such costs in whole or in part or that such costs will not materially and adversely affect our financial condition, results of operations, cash flows and liquidity. We may also incur liabilities if, under environmental laws and regulations, we are required to investigate and clean up environmental contamination, including potential releases of certain hazardous chemicals, which are used in our treatment processes, or at off-site locations where we have disposed of residual waste or caused an adverse environmental impact. The discovery of previously unknown conditions, or the imposition of cleanup obligations in the future, including those obligations related to the disposal of PFAS residuals and other waste, could result in significant costs and could adversely affect our financial condition, results of operations, cash flows and liquidity. Such remediation costs may not be covered by insurance and may make it difficult for us to secure insurance at acceptable rates in the future.

Attention is being given to contaminants of emerging concern, including, without limitation, chemicals and other substances that currently do not have any regulatory standard in drinking water or wastewater or have been recently created or discovered (including by means of scientific achievements in the analysis and detection of trace amounts of substances). We rely upon governmental agencies to set appropriate regulatory standards to protect the public from these and other contaminants, and our role is to provide service that meets these standards, if any. In some of our states, PUCs may disapprove of cost recovery, in whole or in part, for implementation of treatment infrastructure for a contaminant in the absence of a regulatory standard. Furthermore, given the rapid pace at which these contaminants are being identified, created and/or discovered, we may not be able to detect and/or mitigate all such substances in our drinking water system or supplies, which could have a material adverse impact on our financial condition, results of operations and reputation. In addition, we believe these contaminants will continue to form the basis for additional or increased federal or state regulatory initiatives and requirements in the future, which could significantly increase the cost of our operations.

Service interruptions due to severe weather, climate variability patterns and natural or other events are possible across all our businesses. These include, among other things, storms, ice or freezing conditions, high rainfall and wind conditions, hurricanes, tornadoes, earthquakes, landslides, drought, wildfires, coastal and intercoastal floods or high water conditions, including those in or near designated flood plains, pandemics and epidemics, severe electrical storms, sinkholes, solar flares and chemical spills or other contamination causing temporary unavailability of our source water supplies. Weather and other natural events such as these may affect the condition or operability of our facilities, limiting or preventing us from delivering water or wastewater services to our customers, or requiring us to make substantial capital expenditures to repair any damage. TariffsUtility tariffs in place or cost recovery proceedings with respect to our Regulated Businesses may not provide reimbursement to us, in whole or in part, for any of these impacts.

Government restrictions on water use may also result in decreased use of water and wastewater services, even if our water supplies are sufficient to serve our customers, which may adversely affect our financial condition, results of operations and cash flows. Seasonal and other drought conditions, such as those experienced during 2024 in New Jersey, for example,conditions that may impact our water services are possible across all of our service areas. Governmental restrictions imposed in response to a drought may apply to all systems within a region independent of the supply adequacy of any individual system. Responses may range from voluntary to mandatory water use restrictions (including those mandated in New Jersey in 2024),restrictions, rationing restrictions, water conservation regulations, and requirements to minimize water system leaks. While expenses incurred in implementing water conservation and rationing plans may generally be recoverable provided the relevant PUC determines they were reasonable and prudent, we cannot be certain that any such expenses incurred will, in fact, be fully recovered. Moreover, reductions in water consumption, including those resulting from installation of equipment or changed consumer behavior, may persist even after a drought has ended and restrictions are lifted, which could adversely affect our business, financial condition, results of operations and cash flows.

Climate variability may cause increased weather volatility in weather and may impact water usage and related revenue or require additional expenditures, all of which may not be fully recoverable in rates or otherwise.

The issue of climate variability is receiving increasing attention nationally and worldwide. There is consensus among climate scientists that there will be worsening of weather volatility in the future associated with climate variability. Many climate variability predictions present several potential challenges to water and wastewater utilities, including us, such as:

Because of the uncertainty of weather volatility related to climate variability, we cannot predict itsthe potential impact on our business, financial condition, results of operations, cash flows and liquidity. Furthermore, both Federal and state laws and regulations have been enacted or proposed that seek to reduce or limit greenhouse gas emissions and require or would require additional reporting, monitoring and disclosure, and these regulations may become more pervasive or stringent in light of changing governmental agendas and priorities, although the exact nature and timing of these changes is uncertain. Although some or all potential expenditures and costs associated with the impact of climate variability and related laws and regulations on our Regulated Businesses could be recovered through rates, infrastructure replacement surcharges or other regulatory mechanisms, there can be no assurance that PUCs would authorize rate increases to enable us to recover such expenditures and costs, in whole or in part.

•negatively impacting, among other things: (i) tax rates or positions or the deductibility of expenses under federal or state tax laws, (ii) the availability or amount of, or our ability to comply with the terms and conditions of, tax credits or tax abatement benefits, (iii) the amount of taxes owed or paid, including as a result of the CAMT provisions, (iv) the timing of tax effects on ratesrates, or (v) the ability to utilize our net operating loss carryforwards;

•making it easier for governmental entities to convert our assets to public ownership via condemnation, eminent domain or other similar process, or for governmental agencies or private plaintiffs to assessassert liability against us for damages under these or similar processes;

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

The wastewater collection, treatment and disposal operations of our subsidiaries are subject to substantial regulation and involve environmental risks. If collection, treatment or disposal systems fail, overflow, or do not operate properly, untreated or inadequately treated wastewater or other contaminants could spill onto nearby properties or into nearby streams and rivers, causing damage to persons or property, injury to aquatic life and economic damages. This risk is most acute during periods of substantial rainfall or flooding, which are the main causes of sanitary sewer overflow and system failure. Liabilities resulting from such damageevents could adversely and materially affect our business, financial condition, results of operations and cash flows. Some of our wastewater systems have commercial and industrial customers that are subject to specific limitations on the type, character and concentration of the wastewater they are permitted to discharge into our systems. The failure by these commercial and industrial customers to comply with their respective discharge requirements could, in turn, negatively impact our operations, damage our facilities or cause us to exceed applicable discharge limitations and requirements. Liabilities resulting from such exceedance events could adversely and materially affect our business, financial condition, results of operations and cash flows.

Adverse economic conditions may cause our customers, particularly industrial and large commercial customers, to curtail operations. A curtailment of operations by such a customer typically results in reduced water usage by that customer. In more severe circumstances, the decline in usage could be permanent. Any decrease in demand resulting from difficult economic conditions affecting these customers could adversely affect our business, financial condition andcondition, results of operations.operations Tariffsand cash flows. Utility tariffs in place with respect to our Regulated Businesses may not reimburse us, in whole or in part, for any of these impacts.

The water supplies that flow into our treatment plants or are delivered through our distribution system, or the water service that is provided to our customers, may be subject to contamination, including, among other types, contamination from naturally-occurring compounds, chemicals in groundwater systems, pollution resulting from manufactured sources (such as perchlorate, perfluorinated and polyfluorinated compounds,PFAS, methyl tertiary butyl ether, 1,4-dioxane, lead and other materials, or chemical spills or other incidents that result in contaminants entering the water source), and contamination resulting from new and emerging contaminants as well as cyber attacks, possible terrorist attacks or other similar incidents.incidents directed at our operations or industries upstream from our water treatment plants. If one of our water supplies or the water service provided to our customers is contaminated, depending on the nature of the contamination, we may have to take responsive actions that could include, among other things (1) limiting use of the water supply under a “Do Not Use” protective order that enables continuation of basic sanitation and essential fire protection, or (2) interrupting the use of that water supply,supply or water service, in whole or in part, potentially impacting basic sanitation and fire protection needs. If service is disrupted, our financial condition, results of operations, cash flows, liquidity and reputation may be adversely affected. In addition, we may incur significant costs in order to treat the contaminated source through the expansion of our current treatment facilities or the development of new sources of supply or new treatment methods. We may be unable to recover costs associated with treating or decontaminating water supplies through insurance, customer rates, utility tariffs or contract terms, and any recovery of these costs that we are able to obtain through regulatory proceedings or otherwise may not occur in a timely manner. Moreover, we could be subject to claims for damages arising from government enforcement actions or toxic tort or other lawsuits, including class action lawsuits brought by affected parties, arising out of an interruption of service or human exposure to hazardous substances in our drinking water and water supplies. See Item 3—Legal Proceedings for information on certain pending lawsuits and other proceedings related to interruptions of water service.

Since we are engaged in the business of providing water service to our customers, contamination of the water supply, or the water service provided to our customers, could result in substantial injury or damage to our customers, employees or others and we could be exposed to substantial claims and litigation. Such claims could relate to, among other things, personal injury, loss of life, business interruption and expenses related thereto, property damage, pollution, and environmental damage and may be brought by our customers or third parties. Litigation and regulatory proceedings are subject to inherent uncertainties and unfavorable rulings can and do occur. We may not be protected from these claims or negative impacts of these claims in whole or in part by utility tariffs or other contract terms. Negative impacts to our reputation may occur even if we are not liable for any contamination or other environmental damage or the consequences arising out of human exposure to contamination or hazardous substances within the water supply or distributed finished drinking water. In addition, insurance coverage may not cover all or a portion of these losses and are subject to deductibles and other limitations. Pending or future claims against us could have a material adverse impact on our business, financial condition, results of operations and cash flows.

Our business and operations have a large direct and indirect customer base and, as a result, we are exposed to public criticism regarding, among other things, the reliability of water service, wastewater and related or ancillary services, the quality of water provided, and the amount, timeliness, content, accuracy and format of bills that are provided for such services. Adverse publicity and negative consumer sentiment arising out of our operations may render legislatures and other governing bodies, PUCs and other regulatory authorities, and government officials less likely to view us in a favorable light, and may cause us to be susceptible to less favorable legislative, regulatory and economic outcomes, as well as increased regulatory investigations or other oversight and more stringent regulatory or economic requirements. Unfavorable regulatory and economic outcomes may include negative investigative conclusions and/or findings, the enactment of more stringent laws and regulations governing our operations and less favorable economic terms in our long-term contracts related to MSG, as well as fines, penalties or other sanctions or requirements. The imposition of any of the foregoing could have a material negative impact on us and our long-term growth, financial condition, results of operations and cash flows.

Municipalities and other government subdivisions have historically been involved in the provision of water and wastewater services in the United States, and organized efforts may arise from time to time in one or more of the service areas in which our Regulated Businesses operate to convert our assets to public ownership and operation through exercise of the governmental power of eminent domain, or another similar authorized process. A municipality, other government subdivision or a citizen group may seek to acquire our assets through eminent domain or such other process, either directly or indirectly as a result of a citizen petition. For example, onin December 15, 2023, the MPWMD filed eminent domain litigation against Cal Am in Monterey County Superior Court with respect to the Monterey system assets and the case is pending. See Item 3—Legal Proceedings—Proposed Acquisition of Monterey System Assets — Potential Condemnation for additional information regarding this matter.

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. Our water and wastewater systems have been, and may in the future be, vulnerable to disability or failures as a result of physical or cyber attacks, acts of war or terrorism, vandalism and other causes. By way of example, on October 3, 2024, we identified unauthorized activity within our information technology computer networks and systems, which we determined to be the result of a cybersecurity incident. See Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations—Other Matters—Cybersecurity Incident, for more information regarding this incident. Our operational and information technology systems are also vulnerable to unauthorized external or internal access, due to hacking, viruses, social engineering attacks, acts of violence, war or terrorism, and other causes. Unauthorized access to confidential information located or stored on these systems could negatively and materially impact our reputation, customers, employees, suppliers and other third parties. Such unauthorized access could be caused through, among other causes, failure to follow established policies and procedures on the part of our employees, agents, vendors, suppliers, contractors or other third parties. Further, third parties, including vendors, suppliers and contractors, who perform certain services for us or administer and maintain our networks and sensitive information, have been, and may in the future be, targets of cyber attacks and unauthorized access to their operational or information technology systems, and any cyber incident affecting our third-party business partners could significantly disrupt our operations.

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 that those protections alone may not prevent a cyber attack, and we cannot guarantee that such protections will be completely successful in preventing or mitigating a future cyber attack. Future cybersecurity events could cause our operations to be disrupted, property to be damaged, and customer and other confidential information to be lost or stolen; we could experience substantial loss of revenues, response costs and other financial loss; we would likely suffer a loss or redirection of management time, attention and resources from our regular business operations; we may be subject to increased regulatory requirements; our ability to comply with environmental standards and to continue to provide reliable service to our customers may be impacted; we would likely experience litigation and other claims against us; and we may suffer damage to our reputation, any of which could have a negative impact on our business, financial condition, results of operations and cash flows. Applicable laws and regulations or contracts may require us to report cybersecurity events or breaches of securely maintained confidential data, which may cause us to incur costs related to legal claims or proceedings and regulatory fines or penalties. These types of events, and their resulting impacts, either to our facilities or assets, those of third parties, or the industry in general, may also cause us to incur additional security and insurance related costs. In addition, in the ordinary course of business, we collect and retain sensitive information, including personally identifiable information, about our customers and employees. In many cases, we outsource administration of certain functions to vendors that have been and will continue to be targets of cyber attacks. Any theft, loss or fraudulent use of customer, employee or proprietary data as a result of a cyber attack on us or a vendor, supplier, contractor or other third-party business partner could also subject us to significant litigation, liability and costs, as well as adversely impact our reputation with customers and regulators, among others.

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 and may not cover the total loss or damage caused by an attack or a breach. We have incurred, and may continue to incur, certain expenses related to the October 2024 cybersecurity incident, and we maintain a cybersecurity insurance policy as part of our overall insurance program. However, adequate insurance may not be available at rates that we believe are reasonable, and the costs of responding to and recovering from a physical attack, cyber attack or security breach incident may not, in whole or in part, be covered by insurance or recoverable in rates. See Item 1A—Risk Factors Risks Related to our Industry and Business Operations—We may sustain losses that exceed or are excluded from our insurance coverage or for which we are self-insured, below for more information.

Laws and regulations are changing and increasing rapidly with respect to data and consumer privacy, security and protection. We are subject to an increasing number of complex and continually evolving data and consumer privacy, security and protection laws and regulations administered by various federal, state and local governments, including, for example, the California Privacy Rights Act, together with its amendments and implementing regulations, the Virginia Consumer Data Protection Act and the Cyber Incident Reporting for Critical Infrastructure Act of 2022.governments. New laws and regulations may require us to disclose incidents to authorities, regulators and/or the public, when we otherwise may not have been required to disclose such incidents under previous laws and regulations, and such disclosures could negatively and materially impact our reputation, customers, employees, suppliers and other third parties. Federal and state governments have also adopted or are proposing other limitations on, or requirements regarding, the collection, distribution, use, security and storage of personally identifiable information. In addition, the Federal Trade Commission and state attorneys general are applying federal and state consumer protection laws to impose standards on the collection, use and dissemination of data. Moreover, we expect that current laws, regulations and industry standards concerning privacy, data protection and information security in the United States will continue to evolve and increase, and we cannot determine the impact that compliance with such future laws, regulations or standards will have on us or on our business. Any failure or perceived failure by us to comply with current or future federal, state, or local data or consumer privacy or security laws, regulations, policies, guidance, industry standards, or legal obligations, or any incident resulting in unauthorized access to, or the acquisition, release, or transfer of, personally identifiable information or other data relating to our customers, employees and others, may result in private or governmental enforcement actions, litigation, including, for example, from putative class action lawsuits filed in connection with our recent cybersecurity incident,litigation or other claimsclaims, againstas us,well finesas damages, fines, penalties and penalties, /or adverse disclosures, perception or publicity about us and our businesses. See Item 3—Legal Proceedings—Cybersecurity Incident Class Action Lawsuits. These events could also require us to change our business practices, and the events (including any actions we may take to respond to or following such events) or such changes may result in significant diversions of resources, distract management and divert the focus and attention of our security and technical personnel from other critical activities. Any of the foregoing consequences could have a material adverse effect on our business, reputation, financial condition, results of operations, cash flows and liquidity.

The following discussion should be read together with the Consolidated Financial Statements and the Notes thereto included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that are based on management’s current expectations, estimates and projections about the Company’s business, operations and financial performance. The cautionary statements made in this Annual Report on Form 10-K should be read as applying to all related forward-looking statements whenever they appear in this Annual Report on Form 10-K. The Company’s actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of a number of factors, including those that are discussed under “Forward-Looking Statements,” Item 1A—Risk Factors and elsewhere in this Annual Report on Form 10-K. The Company has a disclosure committee consisting of members of senior management and other key employees involved in the preparation of the Company’s SEC reports. The disclosure committee is actively involved in the review and discussion of the Company’s SEC filings. For a discussion and analysis of the Company’s financial statements for fiscal 20232024 compared to fiscal 2022,2023, please refer to Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023,2024, filed with the SEC on February 14,19, 2024.2025.

American Water is the largest and most geographically diverse, publicly-traded water and wastewater utility company in the United States, as measured by both operating revenues and population served. The Company employs approximately 6,7007,000 professionals who provide drinking water, wastewater and other related services to overapproximately 14 million people in 24 states. The Company’s primary business involves the ownership of utilities that provide water and wastewater services to residential, commercial, industrial, public authority, fire service and sale for resale customers, collectively presented as the “Regulated Businesses.” The Company’s utilities operate in 14 states in the United States, with 3.53.6 million active customers with services provided by its water and wastewater networks. Services provided by the Company’s utilities are subject to regulation by PUCs. The Company also operates other businesses not subject to economic regulation by state PUCs that provide water and wastewater services to the U.S. government on military installations, as well as municipalities, collectively presented throughout this Annual Report on Form 10-K within “Other.” See Item 1—Business for additional information.

AsExcluding the Essential Merger Agreement, as of December 31, 2024,2025, the Company had entered into 1720 agreements with a total aggregate purchase price of $105$582 million for pending acquisitions in the Regulated Businesses to add approximately 24,200104,300 additional customers.

On April 10, 2024, the EPA announced a final NPDWR for six PFAS including PFOA, PFOS, PFNA, HFPO-DA, PFHxS, and PFBS. The NPDWR for PFAS establishes MCLs, for PFAS in drinking water. Utilities will be required to complete their initial monitoring for PFAS by 2027, followed by ongoing compliance monitoring. UtilitiesAlthough the EPA has indicated their intent to extend the compliance deadline to 2031, under the current rule, utilities will be required to comply with the new MCLs by April 2029, implementing solutions to reduce PFAS levels where needed. Beginning in April 2029, utilities that exceed any of the PFAS MCLs will be required to provide notification to the public of the violation.

The Company currently estimates an investment of approximately $1$2 billion of capital expenditures to install additional treatment facilities in order to comply with the newNPDWR regulationsfor byPFAS Aprilas 2029.proposed. Additionally, the Company estimates that it will incur annual operating expenses of up to approximately $50 million related to testing and treatment, with the majority of the operating expenses beginning near the April 2029 compliance deadline. The actual level of capital investment and expenses may differ from these estimates and will be dependent upon market dynamics upon implementation of solutions to comply with the NPDWR for PFAS.

On October 30, 2024, the EPA published the LCRI with a “Compliance Date” of November 1, 2027. The LCRI focus includes requirements related to (i) replacing all lead and certain galvanized service lines under a utilities control by October 30, 2037, 10 years from the Compliance Date; (ii) identifying the materials of all service lines of unknown material; (iii) improving tap sampling; (iv) lowering the lead action level; and (v) strengthening protections to reduce exposure. The LCRICompany alsoestimates deferredan the compliance dateinvestment of certainapproximately requirements$1.5 of the LCRR to allow for compliance with both new rules. The Company is in the process of developing an estimatebillion of capital expenditures between 2026 and operating2030 costs neededrelated to meetcomplying the specific requirements ofwith the LCRI. CapitalThe expendituresCompany andwill operatingcontinue coststo associatedinvest thereafter in order to fully comply with compliancethe with federal water quality regulations have been traditionally recognizedLCRI by PUCs as appropriate for inclusion in establishing rates.2037.

(ba)InInterim 2024,rates $23of $5 million waswere effective May 1011, and2024. $25The millionIowa wasUtilities effectiveCommission Februaryissued 21.its final order on May 21, 2025.

On December 5,16, 2024,2025, the IllinoisKentucky CommercePublic Service Commission issued a final order approving the adjustment of base rates requested in a general rate case originally filed on JanuaryMay 25,16, 2024,2025, by the Company’s IllinoisKentucky subsidiary. The general rate casefinal order approved an increase of $105$18 million annualized increase in annualized water and wastewater system revenues, excluding previously recovered infrastructure surcharges of $5$10 million, based on an authorized return on equity of 9.84%,9.70%, authorized rate base of $2.2$667 billion,million and a capital structure with ana common equity component of 49.00%52.26% and a debtnon-equity component of 51.00%.47.74%. The general rate casefinal order deniedalso terminated the secondKentucky stepsubsidiary’s increaseQualified Infrastructure Program (“QIP”) rider and included the costs and investments of $16the million.QIP in approved base rates. The requested annualized revenue increase was effective January 1, 2025, and is driven primarily by approximately $557$212 million inof capital investments madecompleted and to be madeplanned by the IllinoisKentucky subsidiary from JanuaryFebruary 20242025 through December 2026. The new rates were effective as of December 16, 2025.

On FebruaryMay 23,21, 2024,2025, the WVPSCIowa Utilities Commission issued ana final order approving the adjustment of base rates requested in a general rate case originally filed on May 1, 2023,2024, by the Company’s West VirginiaIowa subsidiary. The general rate case order approved ana $18$13 million annualized increase in water and wastewater system revenues, excluding previously recovered infrastructure surcharges of $7$1 million, based on an authorized return on equity of 9.80%,9.60%, authorized rate base of $886$262 million, whichand reflectsa capital investmentsstructure through February 2024,with a common equity ratiocomponent of 50.12%52.57% and a long-term debt ratiocomponent of 49.88%.47.43%. The increasedrequested waterannualized andrevenue wastewaterincrease revenues related to the base rate adjustment are beingwas driven primarily by (i)over $220$157 million of relatedcapital investments made and expected to be made by the Iowa subsidiary through March 2026. Interim rates of $5 million were effective May 11, 2024, with the remaining increase in annualized water and wastewater system capital investments made since the completionrevenues of the$8 Westmillion Virginiaeffective subsidiary’son previousAugust rate1, case, (ii) higher pension and other postretirement benefit costs, and (iii) increases in production costs, including chemicals, fuel and power costs.2025.

On FebruaryJanuary 14,21, 2024,2025, the IndianaTennessee Public Utility Regulatory Commission (the “IURCTPUC”) issuedapproved a motion authorizing an order approving the adjustment of water base rates requested in a rate case filed on MarchMay 31,1, 2023,2024, by the Company’s IndianaTennessee subsidiary. The general rate case orderTPUC approved aan $66increase of $1 million annualized increase in water and wastewater systemannualized revenues, excluding previously recovered infrastructure surcharges,surcharges of $18 million, based on an authorized return on equity of 9.65%,9.70%, authorized rate base of $1.8approximately billion,$300 million, a common equity ratio of 56.15%44.19% and a debt ratio of 43.85%.55.81%. For purposes of determining rates, theThis adjustment istook basedeffect on anJanuary equity21, component of 48.19% due to the regulatory practice in Indiana of including certain zero-cost items or tax credit balances in the capital structure calculation. The annualized revenue increase will include three step increases, with $25 million of the increase to be included in rates in February 2024, $23 million in May 2024,2025, and $18 million in May 2025. The increases are beingis driven primarily by (i)approximately over $875$173 million of water and wastewater systemin capital investments sincecompleted and planned by the completionTennessee of the Indiana subsidiary’s last rate case andsubsidiary through AprilDecember 30, 2025, (ii) higher pension and other postretirement benefit costs, and (iii) increases in production costs, including chemicals, fuel and power costs.2025.

On AugustJanuary 2,27, 2024,2026, the Company’s HawaiiIllinois subsidiary filed a generalrequest with the ICC to adjust its water and wastewater rates. The filing seeks a two-step rate case requesting approximately $2 millionincrease in aggregate annualized incremental revenues, which isrevenue, based on a proposed return on equity of 10.67%10.75%, of (i) approximately $119 million effective January 1, 2027, based on a future test year through December 31, 2027 and a capital structure with an equity component of 52.11%52.42% and a debt component of 47.89%.47.58%, and (ii) approximately $15 million effective January 1, 2028, based on a future test year to include end-of-period rate base and a capital structure with an equity component of 52.74% and a debt component of 47.26%, in each case, exclusive of infrastructure surcharges. The requested annualized incremental revenuerequest is driven primarily by approximately $41$577 million in capital investments made and to be made by the HawaiiIllinois subsidiary from January 2026 through 2025.December 2027. The Hawaiirequest subsidiarymust anticipatesbe thatapproved by the general rate case proceeding will be completed by mid-2025.ICC.

On MayNovember 1,3, 2024,2025, the Company’s IowaVirginia subsidiary filed a generalrequest ratewith casethe requestingSCC to adjust its water and wastewater rates. The request seeks aggregate annualized incremental revenues of approximately $21$22 million in additional annualized revenues, whichand is based on a proposed return on equity of 10.75% and a capital structure with an equity component of 52.57% and debt component of 47.43%.51.79%. The requested annualized incremental revenue increase is driven primarily by approximatelymore $157than $115 million inof capital investments madecompleted and to be madeplanned by the IowaVirginia subsidiary from May 2025 through MarchApril 2026.2027. The filing is subject to the approval of the SCC. Interim rates becamewill be effective May 11,2, 2024,2026, with the difference between interim and final approved rates subject to refund.refund Onto August 29, 2024, the Iowa subsidiary submitted supplemental testimony consistent with the procedural schedule, which was subsequently challenged by the parties in the proceeding. On October 4, 2024, the Iowa Utilities Commission issued an order that granted the inclusion of the supplemental filing and extended the procedural schedule in the case beyond the statutory ten-month period. The Iowa subsidiary now expects resolution of this proceeding by May 2025.customers.

For the three and six months ended MarchJune 31,30, 2026, diluted earnings per share (GAAP) waswere $1.00,$1.61 and $2.61, respectively, compared to $1.05$1.48 and $2.53 per share in the same periodperiods in 2025, which includes the net adjustments presented in the table above and discussed in greater detail in the “Adjustments to GAAP” section below. Excluding the net adjustments presented in the table above, adjusted diluted earnings per share (non-GAAP) waswere $1.01,$1.61 and $2.62, respectively, compared to $1.02$1.49 and $2.51 per share in the same periodperiods in 2025. Revenue growth through implementation of new rates in the Regulated Businesses from the recovery of capital and acquisition investments was partially offset by increased operating costs and higher depreciation and financing costs to support the current capital investment plan.

Adjusted diluted earnings per share represents a non-GAAP financial measure and, as shown in the table above, is calculated as GAAP diluted earnings per share, excluding the impact of one or more of the following events: (i) estimated impact of weather; (ii) incremental interest income from the February 2, 2024 amendment to the Homeowner Services Group (“HOS”) secured seller promissory note (which was repaid in full in February 2026), which increased the aggregate principal amount from $720 million to $795 million and increased the interest rate from 7.00% per year to 10.00% per year; and (iii) transaction costs incurred associated with the proposed merger with Essential. The most directly comparable GAAP measure for adjusted diluted earnings per share is the reported diluted earnings per share (GAAP) and is reconciled in the table above.

The Company continues to grow its businesses, with the substantial majority of its growth to be achieved in the Regulated Businesses through (i) continued capital investment in the Company’s infrastructure to provide safe, clean, reliable and affordable water and wastewater services to its customers, (ii) regulated acquisitions to expand the Company’s services to new customers and (iii) organic growth in existing systems. The Company currently plans to invest approximately $3.7 billion in these growth strategies in 2026. During the first threesix months of 2026, the Company invested $652$1.8 million,billion, primarily in the Regulated Businesses, as discussed below.

•$632$1.4 millionbillion capital investment, primarily in the Regulated Businesses, for infrastructure improvements and replacements; and

Excluding the Essential Merger Agreement (as defined below), as of MarchJune 31,30, 2026, the Company had entered into 2219 agreements with a total aggregate purchase price of $563$236 million for pending acquisitions in the Regulated Businesses to add approximately 101,60056,600 additional customers.

On October 26, 2025, parent company entered into an Agreement and Plan of Merger with Essential (the “Essential Merger Agreement”) to combine the two companies in a stock-for-stock transaction. The Essential Merger Agreement provides that, upon the completion of the proposed merger, Essential’s shareholders will receive 0.305 shares of parent company common stock in exchange for each share of Essential common stock eligible for exchange in the merger. Upon completion of the proposed merger, Essential will be a wholly owned subsidiary of parent company, which will retain its existing name and remain headquartered in Camden, New Jersey. The Company will continue to maintain substantial operations in Pennsylvania, including Essential’s offices in Bryn Mawr and Pittsburgh, Pennsylvania.

Completion of the proposed merger is subject to certain customary conditions, including, among others, the receipt of required approvals from all applicable PUCs (of which KentuckyKentucky, hasOhio and Virginia have already been received) on such terms and conditions that would not, individually or in the aggregate, result in a Burdensome Effect (as defined in the Essential Merger Agreement), and the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.1976 There(the “HSR Act”). The Company currently estimates that the closing of the proposed merger will occur by the end of the first quarter of 2027. However, there can be no guarantee that all of the closing conditions and approvals will be satisfied, and the failure to complete the proposed merger on a timely basis or at all may adversely affect the Company’s financial condition and results of operations. The Company currently estimates that the closing of the proposed merger will occur by the end of the first quarter of 2027. For the three and six months ended MarchJune 31,30, 2026, $5$4 million and $9 million, respectively, of merger-related costs were included in Operation and maintenance expense in the Consolidated Statements of Operations. As of MarchJune 31,30, 2026, the Company has incurred a total of $18$22 million of merger-related costs, including costs incurred in 2025.

As of MarchJune 31,30, 2026, the Company has received settlement payments from defendants 3Min Company,the DuPont de Nemours, Inc. and Tyco Fire Products LPMDL totaling $185$234 million, net of legal fees and administrative costs. The Company is seeking regulatory approval from the respective PUCs to apply the net proceeds of the settlement payments for the benefit of customers, where permissible. As of MarchJuly 31,1, 2026, regulatory approvals for such treatment have been obtained with respect to allout of the11 Company’sCompany utility subsidiaries that are parties to the MDL forsettlements whichand have filed to obtain such treatmentregulatory isapproval, sought, except three, two of whichapprovals have been denied,obtained for seven, two have been denied and onetwo of which remainsremain pending. When and as received, funds receivedare by the Company areinitially being held in a law firm escrow account prior to distribution to the Company’s utility subsidiaries that are parties to the MDL settlements after approval or denial is received from the applicable PUCs. As of MarchJune 31,30, 2026, the funds held in the escrow account and not yet transferred to the Company or returned to customers, totaled $131 million and have been recorded on the Company’s Consolidated Balance Sheet within other current assets. As of June 30, 2026, the Company has recorded a total regulatory liability of $158 million and approximately $79$101 million of the escrowed funds were transferred from the law firm escrow account for distribution to the Company’s utility subsidiaries that have received approval.subsidiaries. The Company anticipates that, during the remainder of 2026, it may receive one or more additional settlement payments from theparties defendants into the MDL.MDL settlements.

The table below summarizes the annualized incremental revenues, assuming a constant sales volume and customer count, resulting from general rate case authorizations that becameare effective during 2026. The amounts include reductions for the amortization of the excess accumulated deferred income taxes (“EADIT”) that are generally offset in income tax expense.

On MarchJuly 5,27, 2026, the Pennsylvania Public ServiceUtilities Commission of(the West“PaPUC”) Virginia issuedreleased an amended order that approvesapproving the adjustment of the Company’s West Virginia subsidiary’s base rates requestedpursuant into a general rate case filed by the Company’s Pennsylvania subsidiary on MayNovember 5,14, 2025. The general rate case orderPaPUC approved ana $75 million annualized increase ofin approximatelythe $20Pennsylvania million insubsidiary’s water and wastewater system revenues, which excludes previously recoveredexcluding infrastructure surcharges of approximately $13$24 million, based on an authorized return on equity of 9.80%,9.55%, a common equity ratio of 51.00%54.23% and a long-term debt ratio of 49.00%.45.77%, As of March 5, 2026, the West Virginia subsidiary’s view of itsand authorized rate base,base of $6.6 billion, which was not stated in the general rate case order, isreflects approximately $1.1$1.2 billion. The increased water and wastewater revenues related to this base rate adjustment are being driven primarily by approximately $239 millionbillion of related water and wastewater system capital investments to be made since the completion of the West Virginia subsidiary’s previous rate case and through February 2026.mid-2027. The new water and wastewater rates becamewill effectivetake aseffect ofon MarchAugust 1,13, 2026.

On NovemberJuly 14,1, 2025,2026, the Company’s PennsylvaniaMissouri subsidiary filed a request with the PennsylvaniaMissouri Public UtilityService Commission (thefor “PaPUC”) to adjust itsnew water and wastewater rates. The request seeks aggregate annualized incremental revenue of approximately $169$179 million, excluding projected infrastructure surcharges of approximately $19$32 million. The request is based on a proposed return on equity of 10.95%10.50% and a capital structure with an equity component of 55.33%.50.30% and a long-term debt component of 49.70%. The requested annualized incremental revenue is driven primarily by anapproximately estimated $1.2$1.6 billion of incremental capital investments completed orand planned toby bethe completedMissouri subsidiary from June 2025 through mid-2027.May 2028, the forecasted future test period. The rateMissouri requestsubsidiary isanticipates subject to approval by the PaPUC, andthat new rates would be expected towill take effect in AugustJune 2026.2027. Pursuant to statutory requirements, the Missouri subsidiary will implement subsequent rate adjustments following the conclusion of the future test year based on required reconciliations, subject to regulatory approval.

On NovemberMay 3,15, 2025,2026, the Company’s VirginiaKentucky subsidiary filed a request with the VirginiaKentucky StatePublic CorporationService Commission (the “SCCKPSC”) to adjust its water and wastewater rates. TheAs filed, the request seeks aggregate annualized incremental revenues of approximately$18 $22million. millionThe Kentucky subsidiary intends to put interim rates into effect beginning on December 14, 2026. The difference between the interim rates and final approved rates will be subject to refund. The request is based on a proposed return on equity of 10.75% and a proposed capital structure with ana common equity component of 51.79%.52.29% and a non-equity component of 47.71%. The requested annualized incremental revenue is driven primarily by anapproximately estimated $115$108 million of capital investmentsto completedbe invested between January 2027 and planned by the Virginia subsidiary from May 2025 through AprilDecember 2027. The filingrequest is subject to approval by the approvalKPSC, and the general rate case is expected to be completed by the end of the SCC.first Interimquarter ratesof will be effective May 2, 2026, with the difference between interim and final approved rates subject to refund to customers.2027.

A number of states have authorized the use of regulatory mechanisms that permit rates to be adjusted outside of a general rate case for certain costs and investments, such as infrastructure surcharge mechanisms that permit recovery of capital investments to replace aging infrastructure. Presented in the table below are annualized incremental revenues, assuming a constant sales volume and customer count, resulting from infrastructure surcharge authorizations that becameare effective during 2026:

(a)In 2026, $11 million was effective January 1 and1, $7 million was effective April 1 and $9 million was effective July 1.

On MarchJune 3,30, 2026, the Company’s MissouriWest Virginia subsidiary filed an infrastructure surcharge proceeding requesting $18$5 million in additional annualized revenues.

For the three and six months ended MarchJune 31,30, 2026, operating revenues increased $62$90 million and $152 million, respectively, primarily due to increases of $56$52 million and $108 million, respectively, from authorized rate increases, including infrastructure surcharges, principally to recover infrastructure investment in various statesstates. In addition, operating revenues increased $11 million and a $6$17 million increasefor the three and six months ended June 30, 2026, respectively, from water and wastewater acquisitions, as well as organic growth in existing systems. For both the three and six months ended June 30, 2026, operating revenues increased $15 million from higher customer demand. Also, for both the three and six months ended June 30, 2026, operating revenues increased $11 million due to warm, dry weather in the second quarter of 2026 and unfavorable weather impacts in the second quarter of 2025.

For the three and six months ended MarchJune 31,30, 2026, operation and maintenance expense increased $22$3 million and $25 million, respectively, due to increased production costs primarily from higher purchased water cost and usageusage, increased purchased power, increased chemical costs and increased purchasedwaste power and chemicalsdisposal costs. In addition, operation and maintenance expense was higher due to increased employee-related costs, increased customer billingcosts and accountingother costsoperating fromexpenses. anThe increase in customeroperation uncollectibleand maintenance expense andwas increasedpartially offset by a decrease in operating supplies and services costscosts, primarily from higherlower technology related costs, and a decrease in maintenance materials and supplies costs.

For the three and six months ended MarchJune 31,30, 2026, depreciation and amortization increased $21 million and $42 million, respectively, primarily due to additional utility plant placed in service from capital infrastructure investments.

For the three and six months ended MarchJune 31,30, 2026, other expenses increased $10$6 million and $16 million, respectively, primarily due to higher interest expense from the issuance of incremental long-term debt.debt partially offset by an increase in allowance for funds used during construction in the current periods.

For the three and six months ended MarchJune 31,30, 2026, the Regulated Businesses’ provision for income taxes increased $1$12 million.million and $13 million, respectively. The Regulated Businesses’ effective income tax rate was 22.7%22.5% and 23.0%22.6% for the three months ended MarchJune 31,30, 2026 and 2025, respectively, and 22.6% and 22.7% for the six months ended June 30, 2026 and 2025, respectively.

For the three and six months ended MarchJune 31,30, 2026, interest expense increased $7$5 million and $12 million, respectively, primarily due to the issuance of incremental long-term debt in the prior period.debt.

For the three and six months ended MarchJune 31,30, 2026, interest income decreased $10$21 million and $31 million, respectively, primarily due to the repayment of the secured seller promissory note in February 2026. See Note 5—Mergers, Acquisitions and Divestitures—Secured Seller Promissory Note from the Sale of Homeowner Services Group, in the Notes to Consolidated Financial Statements for additional information.

During 2026, the Company’s regulatory jurisdictions enacted the following legislation that has been approved butand is not yet effective as of AprilJuly 29, 2026:

•Indiana passed Senate Bill 241, which enables water and wastewater utilities to recover certain power and chemical costs if they rise or decrease within a 3% margin after a two-year period from the date of the eligible utility’s most recent rate case order. Legislation was signed by the Governor on March 6, 2026, and will becomebecame effective on July 1, 2026.

•Iowa passed Senate File 2304, which authorizes the Iowa Utilities Commission to approve alternative ratemaking mechanisms allowing investor-owned water and wastewater utilities to timely adjust rates for costs associated with qualifying system enhancement infrastructure investments outside of traditional rate cases. Legislation iswas awaiting actionsigned by the Governor on June 1, 2026, and will becomebecame effective on July 1, 2026.

•Maryland passed House Bill 1164, which authorizes the MDPSC to extend existing limited-income customer assistance provisions to water and sewage disposal companies, authorizes the adoption of MDPSC approvedMDPSC-approved limited-income mechanismsmechanisms, and requires the MDPSC to study the feasibility of mandating such mechanisms for these utilities. Legislation iswas awaiting actionsigned by the Governor on May 12, 2026, and will becomebecame effective on July 1, 2026.

On February 18, 2026, the Internal Revenue Service issued Notice 2026-7, providing additional CAMT guidance that, among other changes, allows tax repairs to be deducted when calculating the CAMT liability and allows retroactive reliance for companies to file amended returns and recover CAMT already paid. As a result of this guidance, the Company does not expect to be in a CAMT liability position. As of March 31,In 2026, previously recorded current and deferred tax amounts relating to CAMT have beenwere adjusted in the Company’s Consolidated Financial Statements to reflect the revised calculation and refund claim status including the reversal of the $200 million CAMT credit carryforward outstanding as of December 31, 2025. Also, as of March 31,in 2026, the Company recognized additional uncertain tax liabilities of $50 million and, for the three and six months ended June 30, 2026, the Company recognized additional interest of $2$1 million and $3 million, respectively, as the CAMT credit carryforward is no longer available for offset. The Company will continue to evaluate CAMT applicability on a prospective basis.

Liquidity needs for capital investment, working capital and other financial commitments are generally funded through cash flows from operations, public and private debt offerings, issuances of commercial paper and equity and, if and to the extent necessary, borrowings under the revolving credit facility of American Water Capital CorpCorp. (“AWCC”), the Company’s wholly owned finance subsidiary.

The Company expects to fund future maturities of long-term debt through a combination of external debt and, to the extent available, cash flows from operations. Since the Company expects its capital investments over the next few years to be greater than its cash flows from operating activities, the Company currently plans to fund the excess of its capital investments over its cash flows from operating activities for the next2026-2030 fivetime yearsperiod through a combination of long-term debt and equity issuances, in addition to the remaining proceeds from the sale of HOS, all of which were received as of February 13, 2026. See Note 5—Mergers, Acquisitions and Divestitures—Secured Seller Promissory Note from the Sale of Homeowner Services Group, in the Notes to Consolidated Financial Statements for additional information. If necessary, the Company may delay certain capital investments or other funding requirements or pursue financing from other sources to preserve liquidity. In this event, the Company believes it can rely upon cash flows from operations to meet its obligations and fund its minimum required capital investments for an extended period of time.

On AprilMay 1,20, 2026, AWCC completed the sale of $700$500 million aggregate principal amount of its 5.200%4.625% Senior Notes due 2036.2029. At the closing of this offering, AWCC received, after deduction of underwriting discounts and before deduction of offering expenses, net proceeds of approximately $695$498 million. AWCC intends to useused the net proceeds of the offering (i) to lendrepay fundsa toportion Americanat Watermaturity andof its 3.625% Exchangeable Senior Notes due 2026 (the Regulated“Exchangeable BusinessesNotes”); (ii) to repay a portion of its commercial paper obligations of AWCC; and (iii) for general corporate purposes.

As of MarchJune 31,30, 2026, the4,694,836 Companyshares did not receive any proceeds fromof the sale of itsCompany’s common stock connectedremain toavailable for future settlement under the Forward Sale Agreements. The Company estimates that it will receive total net proceeds of approximately $1,131 million, before deducting estimated offering expenses, subject to the price adjustment and other provisions of the Forward Sale Agreements, in the event of full physical settlement of all of theremaining Forward Sale Agreements. The Company intends to use any net cash proceeds that it may receive upon a future settlement of the Forward Sale Agreements for general corporate purposes. The Forward Sale Agreements werehave been classified as equity transactions because they are indexed to the Company’s common stock and physical settlement is within the Company’s control.

On June 29, 2023, AWCC issued $1,035 million aggregate principal amount of 3.625% Exchangeable Senior Notes due 2026 (the “Exchangeable Notes”).Notes. The Exchangeable Notes willmatured maturein full on June 15, 2026, unless earlier exchanged or repurchased, and arethe includedCompany repaid, in Current portion of long-term debt oncash, the Consolidatedoutstanding Balanceprincipal Sheets.balance.

(a)Total remaining availability of $1.3$1.2 billion as of MarchJune 31,30, 2026, was accessible through revolver draws.

Presented in the table below is the Company’s total available liquidity as of MarchJune 31,30, 2026, and December 31, 2025, respectively:

The weighted-average interest rate on AWCC’s outstanding short-term borrowings was approximately 4.07%3.99% and 3.89% at MarchJune 31,30, 2026, and December 31, 2025, respectively.

As of MarchJune 31,30, 2026, the Company had entered into fivethree treasury lock agreements, with a term of 30seven years and an aggregate notional amount totaling $175$75 million, to reduce interest rate exposure on expected future debt issuances. These treasury lock agreements terminate in SeptemberOctober 2026 and have an average fixed interest rate of 4.86%.4.39%. The Company designated these treasury lock agreements as cash flow hedges, with their fair value recorded in accumulated other comprehensive gain or loss.