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 Section 240.14a-11(c) or
Section 240.14a-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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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
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[ ] 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:
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<PAGE>
AMERICAN WATER WORKS COMPANY, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 1, 1997
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 1,
1997, at 10:00 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 3, 1997 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, 1997
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>
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 1, 1997
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 1, 1997, 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, 1997 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 3, 1997 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 78,639,254 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>
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 or 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 below, all of whom are now directors of the Company. In case any
nominee named below 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.
Based on information as of March 3, 1997, the following describes the
age, position with the Company, principal occupation and business
experience during the past five years, and other directorships of each
director.
WILLIAM O. ALBERTINI, age 53, became a director of
the Company in 1990. He is a member of the Audit,
Finance, Nominating and Corporate Governance
Committees. He has been Executive Vice President
[Photograph and Chief Financial Officer since February, 1995
of and Vice President and Chief Financial Officer from
Mr. Albertini] February, 1991 to February, 1995 of Bell Atlantic
Corporation, a provider of telecommunications.
Mr. Albertini is a director of Bell Atlantic
Corporation, Grupo Iusacell, S.A. de C.V. and
Compass Capital Fund.
WILLIAM R. COBB, age 63, became a director of the
Company in 1993. He is a member of the Executive
[Photograph and Audit Committees. Prior to his retirement in
of May, 1991, he was Regional Vice President from
Mr. Cobb] March, 1979 to May, 1991 of American Water Works
Service Company, Inc., the service subsidiary of
the Company.
2
<PAGE>
ELIZABETH H. GEMMILL, age 51, became a director of
[Photograph the Company in 1983. She is a member of the
of Executive, Compensation and Management Development,
Ms. Gemmill] and Nominating Committees. Ms. Gemmill is Vice
President and Secretary of Tasty Baking Company.
HENRY G. HAGER, age 62, became a director of the
Company in 1986. He is a member of the Executive,
Finance, Nominating and Corporate Governance
Committees. He has been President of the Insurance
[Photograph Federation of Pennsylvania, Inc. since January,
of 1985 and a partner in the law firm of Stradley,
Mr. Hager] Ronon, Stevens & Young since November, 1993. He was
a senior partner in the law firm of Liebert, Short
& Hirshland from January, 1982 to November, 1993.
Mr. Hager is a director of Provident American
Corporation.
NELSON G. HARRIS, age 70, became a director of the
Company in 1985. He is a member of the Executive,
Audit, Compensation and Management Development,
Finance and Corporate Governance Committees. He has
[Photograph been Vice Chairman of the Board of the Company
of since May, 1988. In addition, he has been Chairman
Mr. Harris] of the Executive Committee of Tasty Baking Company
since May, 1992 and was its President and Chief
Executive Officer prior thereto. Mr. Harris is a
director of PECO Energy Company and Tasty Baking
Company.
GEORGE W. JOHNSTONE, age 58, became a director of
the Company in 1991. He is a member of the
Executive Committee. He has been President and
[Photograph Chief Executive Officer of the Company since
of January, 1992. In addition, he has been since May,
Mr. Johnstone] 1991, President of American Water Works Service
Company, Inc., the service subsidiary of the
Company. Mr. Johnstone is a director of Mellon Bank
Corporation.
MARILYN WARE LEWIS, age 53, became a director of
the Company in 1982. She is a member of the
Executive, Audit, Compensation and Management
[Photograph Development, Finance and Nominating Committees. She
of has been Chairman of the Board of the Company since
Ms. Lewis] May, 1988. She is a public relations consultant and
serves as Chief Executive Officer of the Ware
Family Offices. Ms. Lewis is a director of CIGNA
Corporation.
3
<PAGE>
NANCY WARE WAINWRIGHT, age 60, became a director of
the Company in 1984. She is a member of the
[Photograph Compensation and Management Development, Finance
of and Nominating Committees. Prior to her retirement
Ms. Wainwright] in July, 1994, she was a Vice President from
August, 1984 to July, 1994 of United Propane, Inc.,
a gas distributor.
PAUL W. WARE, age 50, became a director of the
Company in 1990. He also served as a director of
[Photograph the Company from 1982 to 1986. He is a member of
of the Executive and Nominating Committees. He has
Mr. Ware] been Chairman since June, 1990 and was President
from June, 1989 to March, 1992 of Penn Fuel Gas,
Inc., a gas distributor. Mr. Ware is a director of
York Water Company.
ROSS A. WEBBER, age 62, became a director of the
Company in 1986. He is a member of the Compensation
[Photograph and Management Development, Finance and Corporate
of Governance Committees. He is Professor of
Mr. Webber] Management at The Wharton School at the University
of Pennsylvania and a private consultant on general
management development. Mr. Webber is a director of
Heidemij, N.V.
HORACE WILKINS, JR., age 46, became a director of
the Company in 1996. He is a member of the Audit
and Compensation and Management Development
Committees. He has been Regional President-South
Texas since August, 1996 and was President-Missouri
[Photograph from December, 1992 to August, 1996 of Southwestern
of Bell Telephone Company, a provider of telephone
Mr. Wilkins] services. He was Vice President-Government and
Industry Affairs from July, 1989 to December, 1992
of SBC Communications Inc., a provider of
telecommunications and parent company of
Southwestern Bell Telephone Company. Mr. Wilkins is
a director of Cullen Frost National Bank.
Marilyn Ware 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 Ware Wainwright are
sisters and are cousins of Marilyn Ware Lewis and Paul W. Ware.
4
<PAGE>
MEETINGS OF THE BOARD AND ITS COMMITTEES
Attendance at meetings of the Board of Directors and committees of the
Board by directors averaged 95% during 1996. All nominees attended 75% or
more of their scheduled meetings of the Board of Directors and committees
of the Board of which they were members. There were 11 meetings of the
Board of Directors during 1996.
The Board of Directors has an Executive Committee, an Audit Committee,
a Compensation and Management Development Committee, a Finance Committee, a
Nominating Committee and a Corporate Governance Committee. Membership of
the committees as of the record date of March 3, 1997 is listed at the
beginning of the description of each committee.
MEMBERS OF THE EXECUTIVE COMMITTEE: William R. Cobb, Elizabeth H.
Gemmill, Henry G. Hager, Nelson G. Harris, George W. Johnstone, Marilyn
Ware Lewis (Chairman) and Paul W. Ware. The Executive Committee exercises
all the powers of the Board of Directors when the Board is not in session,
except as otherwise provided by Delaware law and the Company's by-laws.
There were five meetings of the Board's Executive Committee during 1996.
MEMBERS OF THE AUDIT COMMITTEE: William O. Albertini, William R. Cobb,
Nelson G. Harris (Chairman), Marilyn Ware Lewis and Horace Wilkins, Jr. 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 1996 to review the scope of the audit to be
performed, approve the fee to be paid for the audit and 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.
MEMBERS OF THE COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE:
Elizabeth H. Gemmill, Nelson G. Harris, Marilyn Ware Lewis, Nancy Ware
Wainwright, Ross A. Webber (Chairman) and Horace Wilkins, Jr. The
Compensation and Management Development Committee met five times during
1996 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 compensation
to be paid to the President and Chief Executive Officer.
MEMBERS OF THE FINANCE COMMITTEE: William O. Albertini (Chairman),
Henry G. Hager, Nelson G. Harris, Marilyn Ware Lewis, Nancy Ware Wainwright
and Ross A. Webber. The Finance Committee met five times during 1996 to
assist management and the Board of Directors in evaluating matters such as
acquisitions, divestitures, joint ventures and partnerships, to advise
management and make recommendations to the Board of Directors relative to
the various financial policies and programs of the Company and to review
and monitor the funding, asset allocation and investment performance of the
Company's group benefit and retirement plan assets.
5
<PAGE>
MEMBERS OF THE NOMINATING COMMITTEE: William O. Albertini, Elizabeth
H. Gemmill, Henry G. Hager (Chairman), Marilyn Ware Lewis, Nancy Ware
Wainwright and Paul W. Ware. The Nominating Committee met two times during
1996. The Nominating Committee recommends to the Board of Directors the
slate of director-nominees to stand for election each year at the annual
meeting of stockholders and in the event of interim vacancies, candidates
to fill such vacancies on the Board of Directors.
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.
MEMBERS OF THE CORPORATE GOVERNANCE COMMITTEE: William O. Albertini,
Henry G. Hager, Nelson G. Harris (Chairman) and Ross A. Webber. The
Corporate Governance Committee met three times during 1996. The Corporate
Governance Committee reviews, advises and reports to the Board on the
structure, organization, performance and effectiveness of the Board.
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, Finance
Committee, Nominating Committee and Corporate Governance 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. This payment continues for a period equal to the period
the director served as a member of the Board, exclusive of any period when
the director was also a salaried employee of the Company or any of its
subsidiaries. In the event the director dies prior to the expiration of
such period of time, the annual benefit will continue to be paid to the
person selected by the director to receive the benefit for the remainder of
said period of time or the death of said selected person, whichever occurs
first.
6
<PAGE>
STOCK OWNERSHIP INFORMATION
The following table sets forth information as of March 3, 1997 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.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP
-----------------------------
SOLE VOTING SHARED VOTING SHARES OWNED BY
NAME OF INDIVIDUAL OR OR INVESTMENT OR INVESTMENT SPOUSE AND MINOR PERCENT
NUMBER OF PERSONS IN GROUP POWER(1) POWER(2) CHILDREN(2) TOTAL OF CLASS
-------------------------- ------------- ------------- ----------------- --------- --------
<S> <C> <C> <C> <C> <C>
William O. Albertini.................... 5,013 5,013
William R. Cobb......................... 25,822 535,206 7,340 568,368
Elizabeth H. Gemmill.................... 33,032 180,000 31,200 244,232
Henry G. Hager.......................... 8,000 14,306 22,306
Nelson G. Harris........................ 10,055 10,055
George W. Johnstone..................... 87,046 1,084 88,130
Marilyn Ware Lewis...................... 20,400 2,168,775 2,189,175 2.78%
Nancy Ware Wainwright................... 6,924 535,205 542,129
Paul W. Ware............................ 20,400 863,456 883,856 1.12%
Ross A. Webber.......................... 2,840 2,840
Horace Wilkins, Jr...................... 200 200
J. James Barr........................... 752,024 15,783 767,807
W. Timothy Pohl......................... 19,433 19,433
Robert D. Sievers....................... 17,428 17,428
Gerald C. Smith......................... 48,690 63 48,753
All nominees and executive
officers as a group
(15 persons)......................... 1,057,307 3,612,466 69,776 4,739,549 6.03%
</TABLE>
- ------------------
(1) Does not include shares of the Company's Common Stock to be credited
during 1997 to the accounts of the executive officers pursuant to the
Company's Employees' Stock Ownership Plan and Savings Plan for
Employees.
- ------------------
See footnote (2) on page 8
7
<PAGE>
(2) Cobb Foundation, a charitable trust of which William R. Cobb is a
trustee, owns 535,206 shares of the Common Stock of the Company.
Catlin-Wainwright Foundation, a charitable trust of which Nancy Ware
Wainwright is trustee, owns 535,205 shares of the Common Stock of the
Company. Oxford Foundation, Inc., a non-profit corporation of which
Marilyn Ware Lewis and Paul W. Ware are directors, owns 670,176 shares
of the Common Stock of the Company. Warwick Foundation, a charitable
foundation of which Elizabeth H. Gemmill is a trustee, owns 180,000
shares of the Common Stock and 200 shares of 5% Cumulative Preferred
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.
Based upon information available to the Company as of March 3, 1997,
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............................. 6,780,935 66,320 8.71%
his wife Marian S. Ware
550-A Bunker Hill Road
Strasburg, PA 17579
John H. Ware, 3rd................................. 4,350 25,200
550-A Bunker Hill Road
Strasburg, PA 17579
Marian S. Ware.................................... 95,539 670,176
550-A Bunker Hill Road
Strasburg, PA 17579
Northern Trust Corporation........................ 4,007,320 74,022 5.19%
50 South LaSalle Street
Chicago, IL 60675
The Bessemer Group, Incorporated.................. 2,344,139 2,034,568 5.57%
100 Woodbridge Center Drive
Woodbridge, NJ 07095
</TABLE>
Based upon filings with the Securities and Exchange Commission, as of
March 3, 1997 there are no persons who own beneficially more than 5% of the
outstanding shares of the Company's Cumulative Preferred Stock, 5% Series.
8
<PAGE>
REPORT OF THE COMPENSATION AND MANAGEMENT
DEVELOPMENT COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
OVERVIEW
The Compensation and Management Development Committee of the Board of
Directors (the "Committee") is comprised entirely of independent
non-employee directors. The Committee establishes, subject to the
concurrence of the Board of Directors, the Company's compensation policy
and is responsible for administering the compensation program for the
Company's executives.
The Committee endeavors to ensure that the Company's executive
compensation program enables the Company to attract and retain the talented
executives it needs. Consistent with this objective, it is the policy of
the Committee that the total compensation opportunity available to
executives should be competitive with the median remuneration received by
those in positions of similar responsibilities in other utilities. To this
end, an independent compensation consultant is retained to assist the
Committee by periodically studying the Company's compensation program for
executives, reporting its findings and making recommendations consistent
with the compensation policy.
The compensation program for executives is comprised of base salary,
an annual incentive opportunity and a long-term incentive opportunity. The
current salary ranges, annual incentive targets and long-term incentive
targets for executives were established in 1995 based on a study prepared
by the compensation consultant that year. The utility surveys utilized by
the compensation consultant for the study included many of the water
utilities comprising the Dow Jones Water Utilities Index, the published
industry index shown in the performance graph.
SALARY COMPENSATION
The President and Chief Executive Officer, with the concurrence of the
Committee, annually sets the salary within the designated salary band for
each executive other than himself based on his personal assessment of the
performance of each such executive.
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.
9
<PAGE>
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 maintaining the Company as a
leader in the water service industry or in expanding the Company's water
service operations.
ANNUAL INCENTIVE COMPENSATION
The Board of Directors, acting on the Committee's recommendation,
adopted in 1996 an annual cash incentive plan. This plan provides an
opportunity for executives and other key employees of the Company and its
subsidiaries to earn an annual cash incentive award for achieving
financial, customer service and operational goals. The financial goals are
based on achieving the utility operating income and return on equity
authorized by the various state utility regulators for the Company's
utility subsidiaries. Customer service goals are premised on delivering at
all times safe, high quality water at adequate pressures to water service
customers and responding promptly to customer service and billing
inquiries. The operational goals are based on an evaluation of each
participant's individual performance. Under administrative guidelines
adopted by the Committee, Messrs. Johnstone, Barr, Smith, Pohl and Sievers
have target incentive awards for 1997 of $108,300, $48,900, $48,900,
$27,500 and $18,800, respectively. The exact amount of an award depends on
the performance of the Company and of the participant. Under the guidelines
adopted by the Committee for executives, the award percentage of the target
may vary from 80% to 120% as a function of achieving between 85% to 110% of
each of the financial goals.
Awards made to executives under the Annual Incentive Plan for 1996 are
shown in the Summary Compensation Table of this Proxy Statement. These
awards are a function of achieving 99% of the utility operating income and
102% of the return on equity financial goals.
LONG-TERM INCENTIVE COMPENSATION
At their 1994 annual meeting, stockholders of the Company adopted the
Long-Term Performance-Based Incentive Plan for executives and other key
employees of the Company and its subsidiaries. Participants in the
Long-Term Performance-Based Incentive Plan receive awards only if the
Company achieves at least 70% of the Earnings Per Share Growth Performance
Cycle Goal and 80% of the Total Return to Stockholders Performance Cycle
Goal. Under the administrative guidelines adopted by the Committee, Messrs.
Johnstone, Barr, Smith, Pohl and Sievers have target incentive awards for
the performance cycle beginning January 1, 1997 of $173,200, $73,320,
$73,320, $45,900 and $18,810, respectively. 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 70% to 110% of the
Earnings Per Share Growth Performance Cycle Goal and between 80% to 120% of
the Total Return to Stockholders Performance Cycle Goal. Awards to
executives under the plan, if any, are paid as follows: 75% in restricted
shares of Common Stock and 25% in cash.
10
<PAGE>
Awards made to executives under the Long-Term Performance-Based
Incentive Plan for the performance cycle that began January 1, 1994 and
concluded December 31, 1996 are shown in the Summary Compensation Table of
this Proxy Statement. These awards are a function of exceeding the maximum
level of 110% of the Earnings Per Share Growth Performance Cycle Goal and
the maximum level of 120% of the Total Return to Stockholders Performance
Cycle Goal.
INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code generally precludes the
deduction of more than $1 million in compensation paid to the Chief
Executive Officer and any of the four other most highly compensated
executives in any one year, subject to certain specified exceptions. All
compensation earned by these executives in 1996 will be deductible.
AS SUBMITTED BY THE MEMBERS OF THE COMPENSATION
AND MANAGEMENT DEVELOPMENT COMMITTEE:
Elizabeth H. Gemmill Nancy Ware Wainwright
Nelson G. Harris Ross A. Webber
Marilyn Ware Lewis Horace Wilkins, Jr.
Dated: January 9, 1997
11
<PAGE>
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, 1991
[ID: Graphic -- Performance Graph]
<TABLE>
<CAPTION>
DEC-91 DEC-92 DEC-93 DEC-94 DEC-95 DEC-96
<S> <C> <C> <C> <C> <C> <C>
American $100 $107 $122 $114 $171 $188
S&P 500 $100 $108 $118 $120 $165 $203
DJ Water
Utils $100 $107 $121 $113 $146 $175
</TABLE>
12
<PAGE>
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.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS PAYOUTS
---------- ---------
ANNUAL COMPENSATION RESTRICTED
NAME OF EXECUTIVE OFFICER ------------------------------------- STOCK LTIP ALL OTHER
AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS(1) PAYOUTS COMPENSATION(2)
------------------------- --------- ------------ ------------ ----------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
George W. Johnstone........... 1996 $454,000 $120,157 $338,064 $ 63,240 $5,462
President and Chief 1995 446,083 0 943,710 189,720 5,554
Executive Officer 1994 416,250 0 0 0 6,834
of the Company
J. James Barr................. 1996 270,000 54,257 143,136 26,775 5,462
Vice President and 1995 265,833 0 399,540 80,325 5,554
Treasurer of the 1994 255,833 0 0 0 6,846
Company
Gerald C. Smith............... 1996 270,000 54,257 143,136 26,775 6,587
Vice President 1995 265,833 0 399,540 80,325 5,554
of the Company 1994 255,833 0 0 0 6,846
W. Timothy Pohl............... 1996 156,000 25,259 74,016 13,847 6,446
General Counsel and 1995 153,500 0 206,637 41,541 5,480
Secretary of the 1994 147,083 0 0 0 4,698
Company
Robert D. Sievers............. 1996 130,000 20,879 61,200 11,447 5,531
Comptroller of the 1995 127,917 0 170,818 34,341 4,611
Company 1994 122,917 0 0 0 3,969
</TABLE>
- ------------------
(1) Dollar values of restricted shares of Common Stock awards are based on
market price at the time of grant. The aggregate number of restricted
stock held and their value as of December 31, 1996 for the executives
were as follows: Mr. Johnstone -- 50,164 / $1,034,632.50; Mr. Barr --
21,238 shares / $438,033.75; Mr. Smith -- 21,238 shares / $438,033.75;
Mr. Pohl -- 10,984 shares / $226,545.00; and Mr. Sievers -- 9,080
shares / $187,275.00. Dividends are paid on the restricted shares of
Common Stock at the same time and rate as dividends are paid to
holders of unrestricted shares of Common Stock.
(2) Dollar values 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 may participate in
the ESOP beginning on the January 1 following his or her date of hire. 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 3, 1997, the ESOP and Savings Plan together held 3.56% of the
Company's Common Stock.
13
<PAGE>
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 $ 46,271 $ 61,695 $ 77,119 $ 82,369 $ 87,619 $ 92,869
200,000 62,771 83,695 104,619 111,619 118,619 125,619
250,000 79,271 105,695 132,119 140,869 149,619 158,369
300,000 95,771 127,695 159,619 170,119 180,619 191,119
350,000 112,271 149,695 187,119 199,369 211,619 223,869
400,000 128,771 171,695 214,619 228,619 242,619 256,619
450,000 145,271 193,695 242,119 257,869 273,619 289,369
500,000 161,771 215,695 269,619 287,119 304,619 322,119
550,000 178,271 237,695 297,119 316,369 335,619 354,869
600,000 194,771 259,695 324,619 345,619 366,619 387,619
</TABLE>
The Company and its subsidiaries have a defined benefit,
non-contributory Pension Plan which covers substantially all employees,
including the executive officers listed in the Summary Compensation Table
on page 13. 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 and annual cash bonuses, 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 the
highest average remuneration during 60 consecutive months 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 $125,000
per year. As of March 3, 1997, Messrs. Johnstone, Barr, Smith, Pohl and
Sievers have been credited with 30, 35, 44, 12 and 20 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 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 the highest average
remuneration during 36 consecutive months rather than the final 60
consecutive months of employment 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.
14
<PAGE>
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 1996. 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 1996 Annual
Report, will be present at the annual meeting and will have the opportunity
to make a statement, if the representative 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.
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 Investor 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.
15
<PAGE>
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 1998 must submit such proposal in
writing to the Company by November 24, 1997. 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 1996, 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, 1997
16
<PAGE> Proxy Card
DETACH HERE
- ---------------------------------------------------------------------------
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 1, 1997
R The undersigned, hereby revoking any contrary proxy previously
given, hereby appoints George W. Johnstone and Marilyn Ware 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 1, 1997, 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
[LOGO] AMERICAN WATER WORKS COMPANY, INC.
1025 LAUREL OAK ROAD, P.O. BOX 1770, VOORHEES, NEW JERSEY 08043
THIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT.
COMPANY HIGHLIGHTS DURING 1996
o Revenues of $895 million were 11% above those recorded in 1995.
o A 2-for-1 stock split was accomplished in July 1996.
o Net income to common stock increased 11% in comparison with 1995.
Earnings per share in 1996 were $1.31 as compared to $1.32 in 1995
which included $.06 a share from the resolution of litigation in
Massachusetts.
o The common dividend per share paid in 1996 of $.70 was 9.4%
higher than the common dividend paid in 1995. In January 1997, the
Board of Directors increased the quarterly common dividend rate 8.6%
to $.19 a share. This marks the 22nd consecutive year the common
dividend has been increased.
o The total annual return to stockholders over the past five years was
13.4%.
DETACH HERE
- ---------------------------------------------------------------------------
[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, George W. Johnstone, Marilyn Ware Lewis,
Nancy Ware Wainwright, Paul W. Ware, Ross A. Webber, Horace Wilkins, Jr.
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 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.
Please date and sign below. If a 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:________
