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:
--------------------------------------------------------------------
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:
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5) Total fee paid:
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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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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
[LOGO] AMERICAN WATER WORKS COMPANY, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 7, 1998
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 7, 1998, 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 9,
1998 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 27, 1998
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 7, 1998
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 7, 1998, 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 27,
1998 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 9, 1998 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 79,992,518 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
Commencing with the election of directors at the annual meeting, the number
of directors constituting the Board of Directors will be reduced from 12 to 11
directors. Nelson G. Harris, who is currently a director of the Company, is 71
years old and is not standing for reelection. Mr. Harris has been a director of
the Company for the past 13 years.
The 11 directors to be elected at the annual meeting will 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 the event 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 9, 1998, 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.
PHOTO WILLIAM O. ALBERTINI, age 54, became a director of the Company in 1990.
He is a member of the Audit, Corporate Governance and Finance
Committees. He has been Executive Vice President and Chief Financial
Officer since August, 1997 of Bell Atlantic Global Wireless, Inc., a
provider of wireless communication services. He was Executive Vice
President and Chief Financial Officer from February, 1995 to August,
1997 and Vice President and Chief Financial Officer from February, 1991
to February, 1995 of Bell Atlantic Corporation, a provider of
telecommunication services. Mr. Albertini is a director of Grupo
Iusacell, S.A. de C.V. and BlackRock Funds.
2
<PAGE>
PHOTO J. JAMES BARR, age 56, became a director of the Company in 1997. He is
a member of the Executive Committee. He has been President and Chief
Executive Officer of the Company since March, 1998 and was Acting
President and Chief Executive Officer of the Company from November,
1997 to March, 1998. He was Vice President and Treasurer of the Company
prior thereto. In addition, he has been Chairman of the Board and
President since March, 1998 of American Water Works Service Company,
Inc., the service subsidiary of the Company. He was Senior Vice
President-Financial Services of American Water Works Service Company,
Inc. prior thereto.
PHOTO WILLIAM R. COBB, age 64, became a director of the Company in 1993. He
is a member of the Executive and Audit Committees. Prior to his
retirement in 1991, Mr. Cobb was Regional Vice President of American
Water Works Service Company, Inc., the service subsidiary of the
Company.
PHOTO ELIZABETH H. GEMMILL, age 52, became a director of the Company in 1983.
She is a member of the Executive, Compensation and Management
Development, and Corporate Governance Committees. She is Vice President
and Secretary of Tasty Baking Company. Ms. Gemmill is a director of
Universal Display Corporation.
PHOTO HENRY G. HAGER, age 63, became a director of the Company in 1986. He is
a member of the Executive, Corporate Governance and Finance Committees.
He has been President of Insurance Federation of Pennsylvania, Inc.
since January, 1985 and a partner in the law firm of Stradley, 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.
PHOTO MARILYN WARE LEWIS, age 54, became a director of the Company in 1982.
She is a member of the Executive, Audit, Compensation and Management
Development, Corporate Governance and Finance Committees. She has been
Chairman of the Board of the Company since May, 1988. She also serves
as Chief Executive Officer of the Ware Family Offices. Ms. Lewis is a
director of CIGNA Corporation and PP&L Resources, Inc.
3
<PAGE>
PHOTO ANTHONY P. TERRACCIANO, age 59, became a director of the Company in
1997. He is a member of the Audit Commitee. Prior to his retirement in
January, 1998, he was President of First Union Corporation from
January, 1996 to January, 1998. Mr. Terracciano was Chairman of the
Board, President and Chief Executive Officer of First Fidelity
Bancorporation from February, 1990 to January, 1996.
PHOTO NANCY WARE WAINWRIGHT, age 61, became a director of the Company in
1984. She is a member of the Compensation and Management Development,
Corporate Governance and Finance Committees. Prior to her retirement in
July, 1994, Mrs. Wainwright was the Vice President of United Propane,
Inc., a gas distributor.
PHOTO PAUL W. WARE, age 51, became a director of the Company in 1990. He also
served as a director of the Company from 1982 to 1986. He is a member
of the Executive and Audit Committees. He has 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 The York Water
Company.
PHOTO ROSS A. WEBBER, age 63, became a director of the Company in 1986. He is
a member of the Compensation and Management Development and Finance
Committees. He is Professor of Management at The Wharton School at the
University of Pennsylvania and a private consultant on general
management development. Mr. Webber is a director of Arcadis, N.V.
PHOTO HORACE WILKINS, JR., age 47, became a director of the Company in 1996.
He is a member of the Compensation and Management Development and
Corporate Governance Committees. He has been Regional President-South
Texas since August, 1996 and was President-Missouri from December, 1992
to August, 1996 of Southwestern Bell Telephone Company, a provider of
telephone services. He was Vice President-Government and Industry
Affairs from July, 1989 to December, 1992 of SBC Communications Inc., a
provider of telecommunication services 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 Marian S.
Ware, who beneficially owns 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 94% during 1997. All nominees attended 85% or more
of their scheduled meetings of the Board of Directors and committees of the
Board of which they were members. There were 12 meetings of the Board of
Directors during 1997.
The Board of Directors has an Executive Committee, an Audit Committee, a
Compensation and Management Development Committee, a Corporate Governance
Committee and a Finance Committee. Membership of the committees as of the record
date of March 9, 1998 is listed at the beginning of the description of each
committee.
Members of the Executive Committee: Marilyn Ware Lewis (Chairman), J.
James Barr, William R. Cobb, Elizabeth H. Gemmill, Henry G. Hager, Nelson G.
Harris 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 four meetings of
the Board's Executive Committee during 1997.
Members of the Audit Committee: Nelson G. Harris (Chairman), William O.
Albertini, William R. Cobb, Marilyn Ware Lewis, Anthony P. Terracciano and Paul
W. Ware. 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 1997 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: Ross A.
Webber (Chairman), Elizabeth H. Gemmill, Nelson G. Harris, Marilyn Ware Lewis,
Nancy Ware Wainwright and Horace Wilkins, Jr. The Compensation and Management
Development Committee met five times during 1997 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 Corporate Governance Committee: Henry G. Hager (Chairman),
William O. Albertini, Elizabeth H. Gemmill, Marilyn Ware Lewis, Nancy Ware
Wainwright and Horace Wilkins, Jr. The Corporate Governance 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
Corporate Governance Committee also evaluates and reports to the Board of
Directors concerning the effectiveness of the Board and its committee system.
The Corporate Governance Committee met six times during 1997.
The Corporate Governance 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.
5
<PAGE>
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 four times during 1997 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.
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, Corporate Governance Committee and Finance 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 9, 1998 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...... 5,180 5,180 *
J. James Barr............. 760,167 15,909 776,076 1.0%
William R. Cobb........... 25,822 535,206 7,340 568,368 *
Elizabeth H. Gemmill...... 34,613 180,000 54,982 269,595 *
Henry G. Hager............ 8,000 14,781 22,781 *
Marilyn Ware Lewis........ 4,903,005 4,732,205 9,635,210 12.0%
Anthony P. Terracciano.... 1,000 1,000 *
Nancy Ware Wainwright..... 6,924 535,205 542,129 *
Paul W. Ware.............. 20,400 691,376 711,776 *
Ross A. Webber............ 3,031 3,031 *
Horace Wilkins, Jr........ 1,131 1,131 *
Joseph F. Hartnett, Jr.... 5,930 5,930 *
W. Timothy Pohl........... 23,453 23,453 *
Robert D. Sievers......... 20,669 20,669 *
Gerald C. Smith........... 57,492 64 57,556 *
All nominees and executive
officers as a group
(15 persons)........... 5,876,817 5,996,616 93,076 11,966,509 15.0%
</TABLE>
- ------------------
* Represents holdings of less than one percent.
(1) Does not include shares of the Company's Common Stock to be credited during
1998 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 677,376 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 the nominee or officer, 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 9, 1998, the
following persons beneficially own more than 5% of the Company's Common Stock.
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
------------------- ------------- ------------- --------
Marian S. Ware.............. 4,031,049 743,696 6.0%
2 East Main Street
Strasburg, PA 17579
The Bessemer Group,
Incorporated.............. 4,981,563 1,766,996 8.4%
100 Woodbridge Center Drive
Woodbridge, NJ 07095
Based upon filings with the Securities and Exchange Commission, as of March
9, 1998 there are no persons who own beneficially more than 5% of the
outstanding shares of the Company's Cumulative Preferred Stock, 5% Series.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Marilyn Ware Lewis reported on Form 5 one single purchase of 767 shares of
Common Stock that inadvertently was not reported earlier on Form 4. Paul W. Ware
reported on Form 5 one single purchase of 767 shares of Common Stock that
inadvertently was not reported earlier on Form 4.
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 1997 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 the responsibilities and achievements 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.
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,
9
<PAGE>
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. The exact amount of an award depends on
the performance of the Company and of the participant.
Awards made to executives under the Annual Incentive Plan for 1997 are
shown in the Summary Compensation Table of this Proxy Statement.
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. The exact amount of an award is a
function of the Company's attaining its Earnings Per Share Growth and Total
Return to Stockholders Performance Cycle Goals and the individual performance of
the participant. Awards to executives under the plan, if any, are generally paid
as follows: 75% in restricted shares of Common Stock and 25% in cash.
Awards made to executives under the Long-Term Performance-Based Incentive
Plan for the performance cycle that began January 1, 1995 and concluded December
31, 1997 are shown in the Summary Compensation Table of this Proxy Statement.
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 1997 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 8, 1998
10
<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 Water"),
(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.
[GRAPH]
In the printed version of the document, a line graph appears which depicts
the following plot points:
FIVE-YEAR CUMULATIVE TOTAL RETURNS
VALUE OF $100 INVESTED ON DECEMBER 31, 1992
DEC-92 DEC-93 DEC-94 DEC-95 DEC-96 DEC-97
American Water $100 $113 $106 $159 $175 $239
S&P 500 $100 $110 $112 $153 $189 $252
DJ Water Utils $100 $113 $106 $136 $163 $224
11
<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>
J. James Barr(3).......... 1997 $294,333 $ 58,167 $194,022 $ 26,775 $5,465
President and Chief 1996 270,000 54,257 143,136 26,775 5,462
Executive Officer of 1995 265,833 0 399,540 80,325 5,554
the Company
George W. Johnstone(4).... 1997 470,333 128,819 0 521,490 6,605
Retired President and 1996 454,000 120,157 338,064 63,240 5,462
Chief Executive 1995 446,083 0 943,710 189,720 5,554
Officer of the
Company
Gerald C. Smith........... 1997 279,333 58,167 194,022 26,775 6,605
Vice President of the 1996 270,000 54,257 143,136 26,775 6,587
Company 1995 265,833 0 399,540 80,325 5,554
W. Timothy Pohl........... 1997 183,600 32,772 100,345 13,847 6,725
General Counsel and 1996 156,000 25,259 74,016 13,847 6,446
Secretary of the 1995 153,500 0 206,637 41,541 5,480
Company
Joseph F. Hartnett, Jr.... 1997 166,900 29,792 44,239 18,315 6,721
Treasurer of the 1996 0 0 0 0 0
Company 1995 0 0 0 0 0
Robert D. Sievers......... 1997 134,667 22,384 82,955 11,447 6,080
Comptroller of the 1996 130,000 20,879 61,200 11,447 5,531
Company 1995 127,917 0 170,818 34,341 4,611
</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, 1997 for the executives were as
follows: Mr. Barr -- 27,202 shares / $742,955; Mr. Johnstone -- 64,250
shares / $1,754,828; Mr. Smith -- 27,202 shares / $742,955; Mr. Pohl --
14,068 shares / $384,232; Mr. Hartnett -- 0 shares / $0; and Mr. Sievers --
11,630 shares / $317,644. 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.
- ------------------
See footnotes (2), (3) and (4) on page 13
12
<PAGE>
(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.
(3) On November 6, 1997, J. James Barr was elected as a director and appointed
Acting President and Chief Executive Officer of the Company. Coincident
with his appointment, Mr. Barr was awarded 11,000 Common Stock units of the
Company payable on November 6, 2000 based on the per share closing price of
the Company's Common Stock on that date, subject to certain conditions.
This compensation award was filed with the Securities and Exchange
Commission as an exhibit to the Company's Annual Report on Form 10-K for
1997. The foregoing description is qualified in its entirety by reference
to such exhibit.
(4) On November 6, 1997, Mr. Johnstone resigned as President and Chief
Executive Officer and as a director of the Company. Mr. Johnstone continued
as an employee of the Company until his retirement on January 1, 1998. In
December of 1997, the Company and Mr. Johnstone entered into an agreement
(the "Consulting Agreement") whereby Mr. Johnstone will receive $482,000
per year payment for the period beginning January 1, 1998 and ending
December 31, 1999. The Consulting Agreement also quantifies and provides
for the payment of amounts due Mr. Johnstone from his participation as an
employee in various Company benefit plans based on his employment with the
Company prior to his retirement on January 1, 1998, including paying out in
cash his entire award under the Company's Long-Term Performance-Based
Incentive Plan for the 1995-1997 Performance Cycle. The Consulting
Agreement was filed with the Securities and Exchange Commission as an
exhibit to the Company's Annual Report on Form 10-K for 1997. The foregoing
description is qualified in its entirety by reference to such exhibit.
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 9, 1998, the ESOP and
Savings Plan together held 3.5% 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.
YEARS OF SERVICE
FINAL AVERAGE ---------------------------------------------------------------
REMUNERATION 15 20 25 30 35 40
- ------------- -------- -------- -------- -------- -------- --------
$150,000 $ 46,158 $ 61,544 $ 76,930 $ 82,180 $ 87,430 $ 92,680
200,000 62,658 83,544 104,430 111,430 118,430 125,430
250,000 79,158 105,544 131,930 140,680 149,430 158,180
300,000 95,658 127,544 159,430 169,930 180,430 190,930
350,000 112,158 149,544 186,930 199,180 211,430 223,680
400,000 128,658 171,544 214,430 228,430 242,430 256,430
450,000 145,158 193,544 241,930 257,680 273,430 289,180
500,000 161,658 215,544 269,430 286,930 304,430 321,930
550,000 178,158 237,544 296,930 316,180 335,430 354,680
600,000 194,658 259,544 324,430 345,430 366,430 387,430
650,000 211,158 281,544 351,930 374,680 397,430 420,180
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 12. 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 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 those 60 consecutive months of
employment of the final 120 months of employment that yield the highest average.
That 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 $130,000 per year. As of
March 9, 1998, Messrs. Barr, Hartnett, Pohl, Sievers and Smith have been
credited with 36, 5, 13, 21 and 45 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. Barr, Pohl, Sievers 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 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 certain key employees 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 1997. 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 1997 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 $5,500, 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 1999 must submit such proposal in writing to
the Company by November 27, 1998. 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 1997,
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 27, 1998
16
<PAGE> Proxy Card
DIRECTIONS TO AMERICAN WATER WORKS COMPANY, INC.
FROM PHILADELPHIA INTERNATIONAL AIRPORT - Take I-95 North to Walt Whitman
Bridge exit. Take Walt Whitman Bridge into New Jersey. As you leave the
bridge on I-76, stay on the right about 2 miles to I-295 North. Go to Exit
32 (Route 561 - Haddonfield-Berlin Road). Go 4 miles south to 2nd traffic
light after McDonald's. Turn right onto Laurel Oak Road and the office is
on your left.
FROM NORTH JERSEY - Take New Jersey Turnpike south to Exit 4 at Route 73.
Take 73 North 1/2 mile to I-295 South. Take I-295 South to Exit 32 (Route
561 - Haddonfield-Berlin Road). Go 4 miles south to 2nd traffic light
after McDonald's. Turn right onto Laurel Oak Road and the office is on
your left.
FROM CENTER CITY PHILADELPHIA - Take the Vine Street Expressway or Race
Street to the Ben Franklin Bridge. As you leave the bridge stay to the
right onto I-676. Go 5 miles on I-676 (which becomes I-76) staying on the
right to I-295 ramp. Take I-295 5 miles north to Exit 32 (Route 561 -
Haddonfield-Berlin Road). Go 4 miles south to 2nd traffic light after
McDonald's. Turn right onto Laurel Oak Road and the office is on your
left.
FROM DELAWARE - Take Delaware Memorial Bridge to I-295 North to Exit 32
(Route 561 - Haddonfield-Berlin Road). Go 4 miles south to 2nd traffic
light after McDonald's. Turn right onto Laurel Oak Road and the office is
on your left.
DETACH HERE
- ---------------------------------------------------------------------------
AMERICAN WATER WORKS COMPANY, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
FOR THE ANNUAL MEETING OF STOCKHOLDERS ON MAY 7, 1998
The undersigned, hereby revoking any contrary proxy previously
given, hereby appoints J. James Barr and Marilyn Ware Lewis, and
each of them, attorneys and proxies, with full power of substitution
and revocation, to vote all of the shares of the undersigned in
American Water Works Company, Inc. (the "Company") entitled to vote at
P the annual meeting of stockholders of the Company on May 7, 1998, and
at any adjournment thereof, as indicated on the reverse side and in
R accordance with the judgment of said attorneys and proxies on any
other business which may come before the meeting or any such
O adjournment. Except as otherwise indicated on the reverse side, the
undersigned authorizes the proxies appointed hereby to vote
X cumulatively for such of the nominees (in some circumstances, less
than all) as such proxies in their discretion determine if in their
Y 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.
SEE CONTINUED, AND TO BE SIGNED AND DATED, ON REVERSE SIDE SEE
REVERSE REVERSE
SIDE 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 1997
o Revenues of $954 million were 7% above those recorded in 1996.
o Net income to common stock increased 18% in comparison with 1996.
Basic and diluted earnings per share in 1997 were $1.45 as compared
to $1.31 in 1996.
o The common dividend per share paid in 1997 of $.76 was 8.6%
higher than the common dividend paid in 1996. In January 1998, the
Board of Directors increased the quarterly common dividend rate 7.9%
to $.205 a share. This marks the 23rd consecutive year the common
dividend has been increased.
o The total annual return to stockholders over the past five years was
19.1%.
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, J. James Barr, William R. Cobb,
Elizabeth H. Gemmill, Henry G. Hager, Marilyn Ware Lewis,
Anthony P. Terracciano, Nancy Ware Wainwright,
Paul W. Ware, Ross A. Webber, Horace Wilkins, Jr.
[ ] FOR [ ] WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
_________________________________________________________
Withhold vote from the nominees that I/We have written on
the line above, or cumulate votes as I/We have instructed
on the line above.
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:________
