<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
American Water Works Company, Inc.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- ---------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- ---------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- ---------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- ---------------------------------------------------------------------------
(5) Total fee paid:
- ---------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- ---------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- ---------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- ---------------------------------------------------------------------------
(3) Filing Party:
- ---------------------------------------------------------------------------
(4) Date Filed:
- ---------------------------------------------------------------------------
<PAGE>
AMERICAN WATER WORKS COMPANY, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 4, 1995
TO THE HOLDERS OF:
COMMON STOCK
CUMULATIVE PREFERRED STOCK, 5% SERIES
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of
American Water Works Company, Inc. will be held at the office of the
Company, 1025 Laurel Oak Road, Voorhees, New Jersey, on Thursday, May 4,
1995, at 11:00 A.M., E.D.S.T., for the following purposes:
1. To elect 11 directors to hold office until the next annual
election of directors and until their successors are elected and
qualified;
2. To vote to ratify or reject the appointment of independent
accountants made by the Board of Directors to audit the books and
accounts of the Company at the close of the current fiscal year; and
3. To transact such other business as may properly come before
the meeting or any adjournment or adjournments thereof.
Only holders of voting stock of record at the close of business on
March 6, 1995 are entitled to notice of and to vote at the meeting.
By Order of the Board of Directors,
W. TIMOTHY POHL, General Counsel and Secretary
Voorhees, New Jersey
March 24, 1995
YOU ARE URGED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE
ACCOMPANYING ENVELOPE (TO WHICH NO POSTAGE NEED BE AFFIXED IF MAILED IN THE
UNITED STATES), WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. IF YOU
ATTEND THE MEETING, YOU MAY VOTE YOUR SHARES IN PERSON.
<PAGE> 1
AMERICAN WATER WORKS COMPANY, INC.
1025 LAUREL OAK ROAD
VOORHEES, NEW JERSEY 08043
609-346-8200
PROXY STATEMENT FOR THE
ANNUAL MEETING OF STOCKHOLDERS
MAY 4, 1995
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of American Water Works Company, Inc.
(hereinafter called the "Company") to be used at the annual meeting of
stockholders of the Company on Thursday, May 4, 1995, and at any
adjournment thereof. Shares represented by properly executed proxies
received by the Company will be voted at the meeting. Where a choice is
specified by the stockholder, the proxy will be voted in accordance with
such choice. If no choice is specified, the proxy will be voted in
accordance with the recommendations of the Board of Directors. Any proxy
may be revoked at any time insofar as it has not been exercised.
Stockholders may revoke proxies by written notice to the Company, or by
delivery of a proxy bearing a later date, or by personally appearing at the
meeting and casting a vote. This notice of meeting and proxy statement and
the enclosed form of proxy are being mailed beginning March 24, 1995 to the
holders of all voting securities.
The presence in person or representation by proxy of stockholders
entitled to cast a majority of votes on a particular matter to be voted
upon shall constitute a quorum for the purpose of considering such matter.
A proxy marked "withheld" in the election of directors or "abstain" on any
other matter to be voted upon, will be considered to be represented at the
meeting. A proxy marked "withheld" in the election of directors will be
considered as not being voted and, therefore, will have no effect inasmuch
as directors are elected by a plurality of votes cast in the election. A
proxy marked "abstain" on any other matter to be voted upon at the meeting
and broker non-votes will have the effect of an "against" vote inasmuch as
the affirmative vote of a majority of the votes entitled to be cast on the
matter is necessary for approval of the matter.
The close of business on March 6, 1995 has been fixed as the record
date for the determination of stockholders entitled to notice of and to
vote at the annual meeting and any adjournment thereof. On the record
date, there were outstanding and entitled to vote 32,855,209 shares of
Common Stock (one vote per share) and 101,777 shares of Cumulative
Preferred Stock, 5% Series (one-tenth of a vote per share).
<PAGE> 2
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the annual meeting, 11 directors are to be elected to hold office
until the next annual election of directors and until their respective
successors are elected and qualified. It is the intention of the persons
named in the accompanying form of proxy to vote all shares they are
empowered to vote for the election of as many as possible of the persons
named in the following table, all of whom are now directors of the Company.
In case any nominee named in the table withdraws or is otherwise unable to
serve, which is not anticipated, the persons named in the proxy may vote
for another person of their choice.
Stockholders are entitled to cumulative voting rights in the election
of directors. Each holder of Common Stock is entitled to one vote per
share, and each holder of Cumulative Preferred Stock, 5% Series, is
entitled to one-tenth of a vote per share. Each stockholder may cast as
many votes as such stockholder's number of shares shall entitle him or her
to vote in the election of directors multiplied by the number of directors
to be elected, namely 11, and such stockholder may cast all of such votes
for a single director or distribute them among all of the directors to be
voted for, or any two or more of them. A stockholder wishing to exercise
his or her cumulative voting rights should give instructions on the
enclosed form of proxy as to how such stockholder's votes are to be
cumulated.
Unless a stockholder specifically exercises his or her cumulative
voting rights, such stockholder's votes may be distributed among the
nominees (other than those from whom the stockholder withholds his or her
vote) by the persons named in the proxy to elect as many as possible of the
nominees. Such persons may vote cumulatively for such of the nominees (in
some circumstances, less than all) as they in their discretion determine if
in their judgment such action is necessary to elect as many of the nominees
as possible.
Information as of March 6, 1995 concerning the nominees is set forth
below:
<TABLE>
<CAPTION>
DIRECTOR OF
NAME, AGE AND PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE THE COMPANY
POSITION WITH COMPANY DURING PAST FIVE YEARS; OTHER DIRECTORSHIPS SINCE
---------------------- -------------------------------------------- -----------
<S> <C> <C>
WILLIAM O. ALBERTINI, 51 Executive Vice President and Chief Financial Officer since 1990
(2) (3) (5) February, 1995 and Vice President and Chief Financial Officer
from February, 1991 to February, 1995, Bell Atlantic
Corporation, provider of telecommunications; Chairman, President
and Chief Executive Officer from May, 1989 until February, 1991,
Bell Atlantic Enterprises Corporation, provider of cellular
communications, computer maintenance and financial services.
Director: Bell Atlantic Corporation, Grupo Iusacell, S.A. de
C.V.
WILLIAM R. COBB, 61 Retired since May, 1991; Regional Vice President from March, 1993
(1) (2) (4) 1979 to May, 1991, American Water Works Service Company, Inc.,
service subsidiary of the Company.
ELIZABETH H. GEMMILL, 49 Vice President and Secretary, Tasty Baking Company. 1983
(1) (2) (3)
</TABLE>
- ------------------
See footnotes on next page
<PAGE> 3
<TABLE>
<CAPTION>
DIRECTOR OF
NAME, AGE AND PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE THE COMPANY
POSITION WITH COMPANY DURING PAST FIVE YEARS; OTHER DIRECTORSHIPS SINCE
--------------------- -------------------------------------------- -----------
<S> <C> <C>
HENRY G. HAGER, 60 President, Insurance Federation of Pennsylvania, Inc. since 1986
(1) (4) January, 1985; Partner, Stradley, Ronon, Stevens & Young,
attorneys, since November, 1993; Senior Partner, Liebert, Short
& Hirshland, attorneys, from January, 1982 to November, 1993.
Director: Commonwealth Bank and Trust, N.A.
NELSON G. HARRIS, 68 Chairman of the Executive Committee since May, 1992 and 1985
Vice Chairman President and Chief Executive Officer prior thereto, Tasty
of the Board Baking Company. Director: CoreStates Financial Corp., PECO
(1) (2) (4) (5) Energy Company, PrimeSource Corporation, Tasty Baking Company.
WILLIAM F. HYLAND, 71 Of Counsel, Riker, Danzig, Scherer, Hyland & Perretti, 1984
(3) (4) (5) attorneys.
GEORGE W. JOHNSTONE, 56 President and Chief Executive Officer of the Company since 1991
President and Chief January, 1992 and Vice President of the Company from May, 1987
Executive Officer of until January, 1992; President since May, 1991 and Senior Vice
the Company President-Operating Services from February, 1984 until May,
(1) (5) 1991, American Water Works Service Company, Inc., service
subsidiary of the Company.
MARILYN W. LEWIS, 51 Public relations consultant and financial advisor; President, 1982
Chairman of the Board and KLS Educational Systems, Inc., specialized education
Chairman of the Executive consultants, from March, 1987 until January, 1992. Director:
Committee CIGNA Corporation, South Jersey Industries, Inc.
(1) (2) (3) (4) (5)
NANCY W. WAINWRIGHT, 58 Retired since July, 1994; Vice President from August, 1984 to 1984
(3) (5) July, 1994, United Propane, Inc., gas distributor.
PAUL W. WARE, 48 Chairman since June, 1990, Vice Chairman from June, 1987 until 1990(dagger)
(1) (2) June, 1990, President from June, 1989 until March, 1992 and
Executive Vice President from June, 1988 until June, 1989, Penn
Fuel Gas, Inc., gas distributor. Director: York Water Company.
ROSS A. WEBBER, 60 Chairperson of the Management Department and Professor of 1986
(3) (4) Management, The Wharton School, University of Pennsylvania;
Private consultant, general management development. Director:
Heidemij, N.V.
</TABLE>
- -------------------
(dagger) Also Director of the Company from May, 1982 to May, 1986
(1) Member of Executive Committee
(2) Member of Audit Committee
(3) Member of Compensation and Management Development Committee
(4) Member of Nominating Committee
(5) Member of Business Development Committee
<PAGE> 4
Marilyn W. Lewis and Paul W. Ware are the daughter and son of John H.
Ware, 3rd and Marian S. Ware, who beneficially own more than 5% of the
Company's Common Stock. William R. Cobb is the spouse of Rhoda W. Cobb,
who was a director of the Company. Rhoda W. Cobb and Nancy W. Wainwright
are sisters and are cousins of Marilyn W. Lewis and Paul W. Ware.
Attendance at meetings of the Board of Directors and committees of the
Board by directors averaged 95% during 1994. Because of scheduling
conflicts during 1994, William O. Albertini was able to attend only 74% of
the meetings of the Board of Directors and the committees of the Board of
which he is a member. All other nominees attended 87% or more of the
meetings of the Board of Directors and committees of the Board on which he
or she served. There were 11 meetings of the Board of Directors and eight
meetings of the Board's Executive Committee during 1994. The Board of
Directors also has an Audit Committee, a Compensation and Management
Development Committee, a Nominating Committee and a Business Development
Committee. The Audit Committee recommends to the Board of Directors the
independent accountants to audit the books and accounts of the Company.
The Audit Committee met with the Company's independent accountants and the
Company's officers three times during 1994 to review the scope of the audit
to be performed and to approve, subject to review by the Board of
Directors, the fee to be paid for the audit and to review the results of
the audit of the financial statements included in the Annual Report and the
adequacy of internal accounting controls and accounting practices. The
Compensation and Management Development Committee met six times during 1994
to evaluate and report to the Board of Directors concerning the Company's
compensation practices and benefit programs and to evaluate and set,
subject to the concurrence of the Board of Directors, the annual salary to
be paid to the President and Chief Executive Officer. The Nominating
Committee met three times during 1994. The Nominating Committee will
consider nominees for the Board of Directors suggested by stockholders.
Such suggestions must be in writing and delivered to the General Counsel
and Secretary of the Company. The Business Development Committee met three
times during 1994 to assist management in evaluating potential acquisitions
and new businesses.
STOCK OWNERSHIP INFORMATION
The following table sets forth information as of March 6, 1995 with
respect to beneficial ownership of Common Stock of the Company by: (i) the
nominees, (ii) the five most highly compensated executive officers and
(iii) all nominees and executive officers of the Company as a group. If a
nominee owns less than one percent of the Company's Common Stock, no
percentage is shown under the heading "Percent of Class." Information for
the table was obtained from the nominees and executive officers. For
purposes of the table, a person is a "beneficial owner" of the Company's
Common Stock if that person, directly or indirectly, has or shares with
others (i) the power to vote or direct the voting of the Common Stock or
(ii) investment power with respect to the Common Stock, which includes the
power to dispose or direct the disposition of the Common Stock.
<PAGE> 5
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP
-------------------------------
SOLE VOTING SHARED VOTING SHARES OWNED
NAME OF INDIVIDUAL OR OR INVESTMENT OR INVESTMENT BY SPOUSE AND PERCENT
NUMBER OF PERSONS IN GROUP POWER(dagger) POWER* MINOR CHILDREN* TOTAL OF CLASS
-------------------------- ------------- ------------- --------------- ------------ --------
<S> <C> <C> <C> <C> <C>
William O. Albertini...................... 1,966 1,966
William R. Cobb........................... 2,911 5,270 8,181
Elizabeth H. Gemmill...................... 16,516 90,000 15,600 122,116
Henry G. Hager............................ 8,621 8,621
Nelson G. Harris.......................... 2,538 2,538
William F. Hyland......................... 1,157 1,157
George W. Johnstone....................... 9,229 501 9,730
Marilyn W. Lewis.......................... 10,200 443,728 453,928 1.38%
Nancy W. Wainwright....................... 3,462 802,808 806,270 2.45%
Paul W. Ware.............................. 10,200 443,728 453,928 1.38%
Ross A. Webber............................ 1,143 300 1,443
J. James Barr............................. 359,150 7,589 366,739 1.12%
Edward W. Limbach......................... 7,611 7,611
W. Timothy Pohl........................... 2,006 2,006
Gerald C. Smith........................... 8,556 8,556
All nominees and executive
officers as a group (15 persons)........ 445,266 1,476,176 29,260 1,950,702 5.94%
</TABLE>
- ------------------
(dagger) Does not include shares of the Company's Common Stock to be
credited during 1995 to the accounts of the executive
officers pursuant to the Company's Employees' Stock
Ownership Plan and Savings Plan for Employees.
* Ware Foundation, a charitable trust of which Nancy W.
Wainwright is trustee, owns 802,808 shares (2.44%) of the
Common Stock of the Company. Oxford Foundation, Inc., a
non-profit corporation of which Marilyn W. Lewis and Paul W.
Ware are directors, owns 304,088 shares of the Common Stock
of the Company. Warwick Foundation, a charitable foundation
of which Elizabeth H. Gemmill is a trustee, owns 90,000
shares of the Common Stock of the Company. As the trustees
or directors of these non-profit organizations have voting
and investment power, the shares of the Company's Common
Stock held by such non-profit organizations are shown
opposite the name of each such trustee or director, but such
shares are reported only once in the total for nominees and
officers as a group. The nominees deny beneficial ownership
of such shares. The nominees also deny beneficial ownership
of shares owned by their spouses and minor children.
None of the nominees has any material interest in any other stock of
the Company or its subsidiaries.
<PAGE> 6
Based upon information available to the Company as of March 14, 1995
for institutions and as of March 6, 1995 for individuals, the following
persons beneficially own more than 5% of the Company's Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP
------------------------------
SOLE VOTING SHARED VOTING
NAME AND ADDRESS OR INVESTMENT OR INVESTMENT PERCENT
OF BENEFICIAL OWNER POWER POWER OF CLASS
------------------- ------------- ------------- --------
<S> <C> <C> <C>
John H. Ware, 3rd and.............................. 3,385,441 33,160 10.41%
his wife Marian S. Ware
550-A Bunker Hill Road
Strasburg, PA 17579
John H. Ware, 3rd.................................. 2,013 12,600
550-A Bunker Hill Road
Strasburg, PA 17579
Marian S. Ware..................................... 40,175 304,088 1.05%
550-A Bunker Hill Road
Strasburg, PA 17579
Northern Trust Corporation......................... 1,989,136 146,702 6.50%
50 South LaSalle Street
Chicago, IL 60675
The Bessemer Group, Incorporated................... 901,500 1,014,784 5.83%
630 Fifth Avenue
New York, NY 10111
</TABLE>
Based upon filings with the Securities and Exchange Commission, as of
March 6, 1995 there are no persons who own beneficially more than 5% of the
outstanding shares of the Company's Cumulative Preferred Stock, 5% Series.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors, executive officers and persons who own
more than ten percent of the Company's stock to file initial reports of
ownership and reports of changes in ownership of the Company's stock with
the Securities and Exchange Commission and the New York Stock Exchange and
to provide copies of all such reports to the Company. Based solely on a
review of the copies of such reports provided to the Company, the Company
believes that during calendar year 1994 all Section 16(a) filing
requirements applicable to its directors, officers and greater-than-ten-
percent owners were complied with.
<PAGE> 7
MANAGEMENT REMUNERATION
The following table sets forth the annual compensation paid to each of
the Company's five most highly compensated executive officers for services
to the Company and its subsidiaries in all capacities for each of the last
three calendar years.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
NAME OF EXECUTIVE OFFICER ------------------- ALL OTHER
AND PRINCIPAL POSITION YEAR SALARY COMPENSATION(dagger)
------------------------- ---- -------- -------------
<S> <C> <C> <C>
George W. Johnstone.................................................... 1994 $416,250 $6,834
President and Chief Executive Officer of the Company 1993 377,500 6,098
1992 351,667 5,556
J. James Barr.......................................................... 1994 255,833 6,846
Vice President and Treasurer of the Company 1993 245,833 6,098
1992 233,750 5,396
Edward W. Limbach...................................................... 1994 255,833 6,846
Vice President of the Company 1993 245,833 6,098
1992 233,750 5,365
Gerald C. Smith........................................................ 1994 255,833 6,846
Vice President of the Company 1993 245,833 6,098
1992 233,750 5,192
W. Timothy Pohl........................................................ 1994 147,083 4,698
General Counsel and Secretary of the Company 1993 139,667 3,524
1992 126,667 2,770
</TABLE>
- ------------------
(dagger) Value of the shares of the Company's Common Stock purchased with
Company contributions and credited to the account of the named
executive officer under the Employees' Stock Ownership Plan and
Savings Plan for Employees.
The Company has maintained since 1976 an Employees' Stock Ownership
Plan (the "ESOP") which has been amended from time to time, primarily to
reflect changes in federal tax law. All employees of the Company and its
subsidiaries who are not included in a bargaining unit and have more than
one year of service with the Company may participate in the ESOP. The
Company also maintains a Savings Plan for Employees. The Savings Plan was
established in 1993. All employees of the Company and its subsidiaries who
have completed six months of service may participate in the Savings Plan.
As of March 6, 1995, the ESOP and Savings Plan together held 3.58% of the
Company's Common Stock.
<PAGE> 8
PENSION PLAN
The following table shows the approximate annual retirement benefits
which will be payable under the Company's Pension Plan, Supplemental
Executive Retirement Plan and Supplemental Retirement Plan at the normal
retirement age of 65 (assuming continuation of the plans) for specified
years of service and levels of average remuneration.
<TABLE>
<CAPTION>
YEARS OF SERVICE
FINAL AVERAGE ----------------------------------------------------------------------------
REMUNERATION 15 20 25 30 35 40
- ------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
$150,000 46,473 61,964 77,455 82,705 87,955 93,205
200,000 62,973 83,964 104,955 111,955 118,955 125,955
250,000 79,473 105,964 132,455 141,205 149,955 158,705
300,000 95,973 127,964 159,955 170,455 180,955 191,455
350,000 112,473 149,964 187,455 199,705 211,955 224,205
400,000 128,973 171,964 214,955 228,955 242,955 256,955
450,000 145,473 193,964 242,455 258,205 273,955 289,705
</TABLE>
The Company and its subsidiaries have a defined benefit, non-
contributory Pension Plan which covers substantially all employees,
including the executive officers shown above. Annual amounts which are
contributed to the plan and charged to expense during the year are computed
on an aggregate actuarial basis and cannot be individually allocated. The
remuneration covered under the plan includes salaries, but not directors
fees, paid to plan participants. Directors who are not also employees do
not participate in the plan. Benefits under the plan are calculated as a
percentage of average remuneration over the last five years of employment,
which percentage depends on the employee's total number of years of
service. Benefits are not subject to reduction for Social Security or
other benefits, but are restricted under federal tax law to a maximum of
$120,000 per year. As of March 6, 1995, Messrs. Johnstone, Barr, Limbach,
Smith and Pohl have been credited with 28, 33, 30, 42 and 10 years of
service, respectively, under the plan.
In 1985, the Company established a Supplemental Executive Retirement
Plan under which it has agreed to provide additional retirement benefits to
certain employees of the Company and its subsidiaries, designated from time
to time by the Board of Directors. Messrs. Johnstone, Barr, Limbach and
Smith have been so designated. Benefits under the Supplemental Executive
Retirement Plan are intended to (i) provide the additional retirement
benefits that would be payable under the Company's Pension Plan if federal
tax law did not restrict such benefits as described in the preceding
paragraph, (ii) compute the benefits payable on the basis of average
remuneration over the final three years of employment rather than the final
five years and (iii) provide additional years of service to those covered
employees hired in mid-career.
In 1989, recognizing that the federal tax law restrictions on benefits
payable under the Pension Plan had begun to affect employees who were not
eligible for the Supplemental Executive Retirement Plan, the Company
adopted the Supplemental Retirement Plan (the "SRP"). The SRP is designed
to provide benefits to employees above certain salary grades, or otherwise
designated by the Board of Directors, equal to those that would be provided
under the Pension Plan's benefit formula if it were unaffected by the
federal tax law restrictions on benefits. Benefits payable under the SRP
are reduced by any benefit payable to the same individual under the
Supplemental Executive Retirement Plan.
<PAGE> 9
REPORT OF THE COMPENSATION AND MANAGEMENT
DEVELOPMENT COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
The Compensation and Management Development Committee of the Board of
Directors (the "Committee") is comprised entirely of the following
independent non-employee directors: William O. Albertini, Elizabeth H.
Gemmill, William F. Hyland, Marilyn W. Lewis, Nancy W. Wainwright and Ross
A. Webber. The Committee establishes, subject to the concurrence of the
Board of Directors, the Company's compensation policy and objective and is
responsible for administering the compensation program for the Company's
executive officers.
The Committee endeavors to ensure that compensation and benefits are
at levels which enable the Company to attract and retain the high-quality
employees it needs. Consistent with this objective, it is the policy of
the Committee that the total compensation paid to executive officers should
be competitive with the remuneration received by those in positions of
similar responsibilities in other utilities. To this end, an independent
compensation expert is retained to assist the Committee by periodically
studying the Company's compensation program for executive officers,
reporting its findings and making recommendations consistent with the
compensation policy. The Committee then establishes the appropriate salary
range or band for each officer position based on the findings of the
independent compensation expert. The current salary ranges for the
executive officers were established in 1993 based on a study prepared by
the independent compensation expert that year. The utility surveys for the
study included those water utilities comprising the Dow Jones Water
Utilities Index, the published industry index shown in the performance
graph.
The President and Chief Executive Officer, with the concurrence of the
Committee, annually sets the salary within the designated salary band for
each executive officer other than himself based on his personal assessment
of the performance of each such officer. Generally, each salary is set
within the upper quartiles of the salary band for that executive officer.
The Committee, with the concurrence of the Board of Directors, sets a
salary within the designated salary band for the President and Chief
Executive Officer on the basis of merit. This evaluation of merit involves
an analysis of (i) the Company's financial performance within the
limitations imposed by state utility regulators and fluctuating and varying
weather conditions and (ii) the performance of the President and Chief
Executive Officer in maintaining the Company as a leader in the water
service industry and in expanding the Company's water service operations
consistent with the Company's commitment to quality water service to
customers of its utility subsidiaries.
Inasmuch as water service operations are the Company's principal
business, evaluating the Company's financial performance requires an
understanding of (i) the prevailing regulatory practice in each of the
states in which the Company's utility subsidiaries operate and (ii) the
effect varying weather conditions have on revenues and expenses.
Consequently, the Committee has not adopted a formula relationship between
changes in the Company's financial performance and changes in the level of
salary compensation for the President and Chief Executive Officer.
Similarly, because of the varied subjective considerations involved, the
Committee does not evaluate on a formula basis the performance of the
President and Chief Executive Officer in
<PAGE> 10
maintaining the Company as a leader in the water service industry or in
expanding the Company's water service operations.
The salary being paid to George W. Johnstone, the Company's President
and Chief Executive Officer, was reviewed at the April, 1994 meeting of the
Committee, the meeting during each calendar year at which the compensation
paid to executive officers and others is evaluated. Based on the analysis
described above, Mr. Johnstone's annual salary was increased to $435,000,
effective June 1, 1994. This salary is within the upper quartiles of Mr.
Johnstone's salary band.
At their 1994 annual meeting, stockholders of the Company adopted the
Long-Term Performance-Based Incentive Plan for executive officers and other
key employees of the Company and its subsidiaries. For the two three-year
performance cycles beginning January 1, 1993 and January 1, 1994,
respectively, the Committee has designated the six executive officers of
the Company and nine subsidiary presidents to be eligible to receive
awards. For the three-year performance cycle beginning January 1, 1995,
the Committee has designated 39 individuals as eligible to receive awards.
The first awards under the Incentive Plan are anticipated to be made during
1996, following the end of the performance cycle that began January 1,
1993.
Awards will be made only if the Company achieves at least 80% of each
of the two performance cycle goals. Under the administrative guidelines
adopted by the Committee, Messrs. Johnstone, Barr, Limbach, Smith and Pohl
have target incentive awards for the performance cycle beginning January 1,
1993 of $505,920, $214,200, $214,200, $214,200 and $110,775, respectively.
For each of the performance cycles beginning January 1, 1994 and 1995, the
target incentive awards for these officers are $168,640, $71,400, $71,400,
$71,400 and $36,925, respectively. The target incentive award established
for each of these executive officers and other participants in the initial
performance cycle beginning January 1, 1993 is equal to three times the
amount of the target incentive award for the two subsequent performance
cycles. This permits those participants in the initial three-year
performance cycle the opportunity for incentive compensation from the
effective date of the Incentive Plan equal to their target incentive awards
estimated to be paid on an annual basis in the future.
Awards for each of these three performance cycles, if any, will be
paid in restricted stock and in cash. The exact amount of an award depends
on the performance of the Company and of the participant. Under the
guidelines adopted by the Committee, the award percentage of the target may
vary from 50% to 150% as a function of achieving between 80% to 120% of
each performance cycle goal.
AS SUBMITTED BY THE MEMBERS OF THE COMPENSATION
AND MANAGEMENT DEVELOPMENT COMMITTEE:
William O. Albertini Marilyn W. Lewis
Elizabeth H. Gemmill Nancy W. Wainwright
William F. Hyland Ross A. Webber
Dated: January 5, 1995
<PAGE> 11
PERFORMANCE GRAPH
The following graph compares the changes over the last five years in
the value of $100 invested in (i) the Company's Common Stock ("American"),
(ii) the Standard & Poor's 500 Stock Index ("S&P 500") and (iii) the Dow
Jones Water Utilities Index ("DJ Water Utils").
The year-end values of each investment are based on share price
appreciation and the reinvestment of all dividends. The calculations
exclude trading commissions and taxes. Total stockholder returns from each
investment, whether measured in dollars or percent, can be calculated from
the year-end investment values shown beneath the graph.
FIVE-YEAR CUMULATIVE TOTAL RETURNS
VALUE OF $100 INVESTED ON DECEMBER 31, 1989
[ID: GRAPHIC -- PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
Dec-89 Dec-90 Dec-91 Dec-92 Dec-93 Dec-94
<S> <C> <C> <C> <C> <C> <C>
American $100 $93 $160 $172 $195 $182
S&P 500 $100 $97 $126 $136 $150 $152
DJ Water Utils $100 $89 $136 $146 $164 $154
</TABLE>
<PAGE> 12
DIRECTOR REMUNERATION
The amounts paid to directors who are not employees of the Company or
one of its subsidiaries for their services as such and for their
participation on committees of the Board are as follows: (i) each director
receives a retainer of $15,500 per year plus a fee of $1,200 for each Board
meeting attended, (ii) each member of the Executive Committee receives an
additional retainer of $13,000 per year plus a fee of $1,000 for each
Executive Committee meeting attended and (iii) the Chairmen of the Audit
Committee, Compensation and Management Development Committee, Nominating
Committee and Business Development Committee each receive an additional
retainer of $1,500 per year, and each member of such committees receives a
fee of $1,000 for each meeting attended. The Chairman of the Board and
Executive Committee and Vice Chairman of the Board receive additional
annual retainers of $85,000 and $20,000, respectively. Directors who are
employees of the Company or one of its subsidiaries do not receive
retainers or attendance fees. A retiring director receives, as a
retirement benefit, an annual amount equal to the retainer for service as a
director in effect at the time of retirement. Such payment continues for a
period equal to the lesser of (i) the life of such director or (ii) the
period such director served as a member of the Board, exclusive of any
period when such director was also a salaried employee of the Company or
any of its subsidiaries.
PROPOSAL NO. 2
RATIFICATION OF THE
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Subject to ratification by stockholders, the Board of Directors,
acting upon the recommendation of the Audit Committee, has appointed Price
Waterhouse LLP as independent accountants to audit the books and accounts
of the Company at the close of the current fiscal year. Price Waterhouse
LLP acted as independent accountants for the Company during 1994. It is
intended that, in the absence of contrary direction, the proxies will be
voted for the ratification of Price Waterhouse LLP as independent
accountants, and the Board of Directors recommends that the stockholders
vote to ratify the appointment of Price Waterhouse LLP as independent
accountants. In the event the appointment of Price Waterhouse LLP is
ratified, it is expected that Price Waterhouse LLP will also audit the
books and accounts of certain subsidiaries of the Company at the close of
their current fiscal years. A representative of Price Waterhouse LLP,
whose report on the Company's financial statements appears in the 1994
Annual Report, will be present at the annual meeting and will have the
opportunity to make a statement, if he desires to do so, and to respond to
appropriate questions from stockholders.
OTHER MATTERS
The Board of Directors does not know of any other matters which may
come before the meeting. However, if any other matters properly come
before the meeting, it is the intention of the persons named in the
accompanying form of proxy to vote the proxy in accordance with their
judgment on such matters.
<PAGE> 13
SOLICITATION OF PROXIES
The Company will bear the cost of solicitation of proxies. Proxies
may be solicited by mail, telephone, telegram, facsimile, or in person.
The Company may pay banks, brokers or other nominees who hold stock in
their names for their expenses in sending soliciting material to their
principals. Corporate Investors Communications, Inc. has been retained to
assist in the solicitation of proxies at a fee of $5,000, plus reasonable
out-of-pocket expenses.
It is important that proxies be returned promptly. Therefore,
stockholders are urged to complete, date, sign and return the enclosed
proxy in the accompanying envelope (to which no postage need be affixed if
mailed in the United States), whether or not they plan to attend the
meeting. Stockholders attending the meeting may vote their shares in
person.
STOCKHOLDER PROPOSALS
Any stockholder who desires to submit a proposal to be considered for
inclusion in the Company's proxy statement and form of proxy relating to
its annual meeting of stockholders in 1996 must submit such proposal in
writing to the Company by November 25, 1995. Such proposals should be
directed to the General Counsel and Secretary of the Company.
FORM 10-K REPORT
Upon the written request of any person who on the record date was a
record owner of stock of the Company, or who represents in good faith that
he or she was on such date a beneficial owner of such stock, the Company
will send to such person, without charge, a copy of its annual report on
Form 10-K for 1994, including financial statements and schedules, as filed
with the Securities and Exchange Commission. Requests for this report
should be directed to: W. Timothy Pohl, General Counsel and Secretary,
American Water Works Company, Inc., 1025 Laurel Oak Road, P. O. Box 1770,
Voorhees, New Jersey 08043.
By Order of the Board of Directors,
W. TIMOTHY POHL, General Counsel and Secretary
Dated: March 24, 1995
<PAGE> Proxy Card
AMERICAN WATER WORKS COMPANY, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
P FOR THE ANNUAL MEETING OF STOCKHOLDERS ON MAY 4, 1995
R The undersigned, hereby revoking any contrary proxy previously
given, hereby appoints George W. Johnstone and Marilyn W. Lewis, and
O each of them, attorneys and proxies, with full power of substitution
and revocation, to vote all of the shares of the undersigned in
X American Water Works Company, Inc. (the "Company") entitled to vote at
the annual meeting of stockholders of the Company on May 4, 1995, and
Y at any adjournment thereof, as indicated on the reverse side and in
accordance with the judgment of said attorneys and proxies on any
other business which may come before the meeting or any such
adjournment. Except as otherwise indicated on the reverse side, the
undersigned authorizes the proxies appointed hereby to vote
cumulatively for such of the nominees (in some circumstances, less
than all) as such proxies in their discretion determine if in their
judgment such action is necessary to elect as many of the nominees as
possible.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED BY THE STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSAL 1, WITH THE DISCRETIONARY AUTHORITY DESCRIBED
ABOVE, AND FOR PROPOSAL 2.
CONTINUED, AND TO BE SIGNED AND DATED, ON REVERSE SIDE SEE REVERSE
SIDE
<PAGE> Reverse Side of Proxy Card
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
1. ELECTION OF DIRECTORS.
NOMINEES: William O. Albertini, William R. Cobb, Elizabeth H. Gemmill,
Henry G. Hager, Nelson G. Harris, William F. Hyland, George W. Johnstone,
Marilyn W. Lewis, Nancy W. Wainwright, Paul W. Ware, Ross A. Webber
FOR WITHHELD
[ ] [ ]
___________________________________________________________________
Withhold vote from the nominees that I/We have written on the above
line, or cumulate votes as I/We have instructed on the above line
FOR AGAINST ABSTAIN
2. Ratification of the appointment of [ ] [ ] [ ]
Price Waterhouse LLP as independent
accountants.
3. In their discretion, upon other matters as may properly come before the
meeting.
MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE AT LEFT
Please date and sign below. If joint account, each owner should sign.
When signing in a representative capacity, please give title. Please sign
here exactly as name is stenciled hereon.
Signature:___________________________________________Date__________________
Signature:___________________________________________Date__________________
Please return your signed proxy at once in the enclosed envelope, which
requires no postage if mailed in the United States, even though you expect
to attend the meeting in person.
