FORM 10-Q Page 1 of 19
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
---------------------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-3437-2
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AMERICAN WATER WORKS COMPANY, INC.
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(Exact name of registrant as specified in its charter)
Delaware 51-0063696
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1025 Laurel Oak Road, Voorhees, New Jersey 08043
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(Address of principal executive offices) (Zip Code)
(856) 346-8200
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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At November 1, 1999, the number of shares of common stock, $1.25 par value,
outstanding was 96,914,952 shares.
<PAGE> Page 2 FORM 10-Q
PART I FINANCIAL INFORMATION
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Item 1. Financial Statements
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AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES
-----------------------------------------------------------
Consolidated Statements of Income and Comprehensive Income
and of Retained Earnings (Unaudited)
(In thousands, except per share amounts)
<TABLE>
Three Months Ended
September 30,
1999 1998
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<S> <C> <C>
CONSOLIDATED INCOME AND COMPREHENSIVE INCOME
Operating revenues $353,578 $333,515
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Operating expenses
Operation and maintenance 148,045 140,591
Depreciation and amortization 38,116 35,521
General taxes 31,074 29,050
-------- --------
Total operating expenses 217,235 205,162
-------- --------
Operating income 136,343 128,353
-------- --------
Other income (deductions)
Interest (44,942) (43,109)
Allowance for other funds used during
construction 2,841 2,570
Allowance for borrowed funds used
during construction 2,765 1,620
Amortization of debt expense (730) (620)
Preferred dividends of subsidiaries (812) (830)
Merger related costs (6,521) (13)
Other, net (1,539) 13
-------- --------
Total other income (deductions) (48,938) (40,369)
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Income before income taxes 87,405 87,984
Provision for income taxes 34,558 34,396
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Net income 52,847 53,588
Dividends on preferred stocks 996 996
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Net income to common stock 51,851 52,592
Other comprehensive income
Unrealized gains on securities 13,286 5,003
Income taxes on other comprehensive income (5,874) (1,951)
-------- --------
Comprehensive income $ 59,263 $ 55,644
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<PAGE> Page 3 FORM 10-Q
Three Months Ended
September 30,
1999 1998
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<S> <C> <C>
Average shares of basic common stock outstanding 96,672 95,476
Basic and diluted earnings per common share on
average shares outstanding $ 0.54 $ 0.55
========== ==========
CONSOLIDATED RETAINED EARNINGS
Balance at July 1 $ 959,221 $ 896,142
Add - net income 52,847 53,588
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1,012,068 949,730
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Deduct - dividends paid
Preferred stock 882 882
Preference stock 114 114
Common stock - $.215 per share in 1999;
$.205 per share in 1998 20,768 16,476
National Enterprises Inc. common stock -- 1,416
---------- ----------
21,764 18,888
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Balance at September 30 $ 990,304 $ 930,842
========== ==========
The results presented in 1999 and the restated results for 1998 reflect the
pooling of interests method of accounting to recognize the recent acquisition
of National Enterprises Inc.
The accompanying information and notes are an integral part of these
financial statements.
</TABLE>
<PAGE> Page 4 FORM 10-Q
AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES
-----------------------------------------------------------
Consolidated Statements of Income and Comprehensive Income
and of Retained Earnings (Unaudited)
(In thousands, except per share amounts)
<TABLE>
Nine Months Ended
September 30,
1999 1998
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<S> <C> <C>
CONSOLIDATED INCOME AND COMPREHENSIVE INCOME
Operating revenues $949,969 $899,960
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Operating expenses
Operation and maintenance 422,303 396,603
Depreciation and amortization 111,850 102,982
General taxes 93,247 86,852
-------- --------
Total operating expenses 627,400 586,437
-------- --------
Operating income 322,569 313,523
-------- --------
Other income (deductions)
Interest (133,254) (126,287)
Allowance for other funds used during
construction 8,682 6,676
Allowance for borrowed funds used
during construction 8,178 3,966
Amortization of debt expense (2,090) (1,815)
Preferred dividends of subsidiaries (2,458) (2,569)
Merger related costs (20,535) (13)
Other, net (3,144) (559)
-------- --------
Total other income (deductions) (144,621) (120,601)
-------- --------
Income before income taxes 177,948 192,922
Provision for income taxes 71,557 76,026
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Net income 106,391 116,896
Dividends on preferred stocks 2,988 2,988
-------- --------
Net income to common stock 103,403 113,908
Other comprehensive income
Unrealized gains on securities 74,551 30,844
Income taxes on other comprehensive income (29,477) (12,029)
-------- --------
Comprehensive income $148,477 $132,723
======== ========
Average shares of basic common stock outstanding 96,309 95,082
Basic and diluted earnings per common share on
average shares outstanding $ 1.07 $ 1.20
======== ========
<PAGE> Page 5 FORM 10-Q
Nine Months Ended
September 30,
1999 1998
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<S> <C> <C>
CONSOLIDATED RETAINED EARNINGS
Balance at January 1 $ 945,434 $ 870,368
Add - net income 106,391 116,896
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1,051,825 987,264
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Deduct - dividends paid
Preferred stock 2,646 2,646
Preference stock 342 342
Common stock - $.645 per share in 1999;
$.615 per share in 1998 55,642 49,243
National Enterprises Inc. common stock 2,891 4,191
---------- ----------
61,521 56,422
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Balance at September 30 $ 990,304 $ 930,842
========== ==========
The results presented in 1999 and the restated results for 1998 reflect the
pooling of interests method of accounting to recognize the recent acquisition
of National Enterprises Inc.
The accompanying information and notes are an integral part of these
financial statements.
</TABLE>
<PAGE> Page 6 FORM 10-Q
AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES
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Consolidated Balance Sheet (Unaudited)
(In thousands)
<TABLE>
September 30 December 31
1999 1998
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<S> <C> <C>
ASSETS
Property, plant and equipment
Utility plant - at original cost less
accumulated depreciation $ 4,804,086 $ 4,612,351
Utility plant acquisition adjustments, net 53,952 55,097
Non-utility property, net of accumulated
depreciation 30,861 32,985
Excess of cost of investments in
subsidiaries over book equity at
acquisition, net 24,382 24,431
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Total property, plant and equipment 4,913,281 4,724,864
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Current assets
Cash and cash equivalents 45,983 51,794
Customer accounts receivable 102,648 85,018
Allowance for uncollectible accounts (2,287) (2,263)
Unbilled revenues 79,496 75,943
Miscellaneous receivables 8,283 9,308
Materials and supplies 19,842 16,786
Deferred vacation pay 11,898 10,127
Other 18,440 13,513
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Total current assets 284,303 260,226
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Regulatory and other long-term assets
Regulatory asset - income taxes
recoverable through rates 221,695 218,527
Other investments 153,614 79,253
Debt and preferred stock expense 48,773 45,645
Deferred pension expense 29,597 27,011
Deferred postretirement benefit expense 11,260 12,538
Deferred treatment plant costs 6,076 6,873
Deferred water utility billings 1,726 1,862
Tank painting costs 14,421 13,558
Funds restricted for construction 27,697 10,935
Other 65,549 57,366
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Total regulatory and other long-term assets 580,408 473,568
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TOTAL ASSETS $ 5,777,992 $ 5,458,658
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<PAGE> Page 7 FORM 10-Q
September 30 December 31
1999 1998
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<S> <C> <C>
CAPITALIZATION AND LIABILITIES
Capitalization
Common stock $ 121,176 $ 119,790
Paid-in capital 415,159 384,254
Retained earnings 990,304 945,434
Accumulated other comprehensive income 78,212 33,138
Unearned compensation (1,165) (980)
Treasury stock (3,700) (25)
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Common stockholders' equity 1,599,986 1,481,611
Preferred stocks with mandatory redemption
requirements 40,000 40,000
Preferred stocks without mandatory
redemption requirements 11,673 11,673
Preferred stocks of subsidiaries with
mandatory redemption requirements 36,064 39,161
Preferred stocks of subsidiaries without
mandatory redemption requirements 6,255 6,255
Long-term debt
American Water Works Company, Inc. 211,000 216,500
Subsidiaries 2,185,817 2,115,687
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Total capitalization 4,090,795 3,910,887
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Current liabilities
Bank debt 119,867 88,590
Current portion of long-term debt 60,580 53,763
Accounts payable 49,095 69,623
Taxes accrued, including federal income 36,607 23,628
Interest accrued 50,447 41,863
Accrued vacation pay 12,543 10,613
Other 67,948 47,532
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Total current liabilities 397,087 335,612
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<PAGE> Page 8 FORM 10-Q
September 30 December 31
1999 1998
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<S> <C> <C>
Regulatory and other long-term liabilities
Advances for construction $ 204,797 $ 191,738
Deferred income taxes 586,856 535,106
Deferred investment tax credits 40,892 41,976
Accrued pension expense 57,361 50,591
Accrued postretirement benefit expense 12,536 18,549
Other 24,930 19,798
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Total regulatory and other long-term
liabilities 927,372 857,758
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Contributions in aid of construction 362,738 354,401
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Commitments and contingencies -- --
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TOTAL CAPITALIZATION AND LIABILITIES $ 5,777,992 $ 5,458,658
=========== ===========
The results presented in 1999 and the restated results for 1998 reflect the
pooling of interests method of accounting to recognize the recent acquisition
of National Enterprises Inc.
The accompanying information and notes are an integral part of these
financial statements.
</TABLE>
<PAGE> Page 9 FORM 10-Q
AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES
-----------------------------------------------------------
Consolidated Statement of Cash Flows (Unaudited)
(In thousands)
<TABLE>
Nine Months Ended
September 30,
1999 1998
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $106,391 $116,896
Adjustments
Depreciation and amortization 111,850 102,982
Provision for deferred income taxes 14,305 11,548
Provision for losses on accounts receivable 4,939 4,917
Allowance for other funds used during
construction (8,682) (6,676)
Employee benefit expenses less
than funding (273) (2,458)
Employee stock plan expenses 4,299 4,486
Deferred tank painting costs (2,243) (3,521)
Deferred rate case expense (1,434) (1,137)
Amortization of deferred charges 10,568 8,036
Other, net (6,814) (5,221)
Changes in assets and liabilities
Accounts receivable (21,520) (24,131)
Unbilled revenues (3,553) (6,723)
Other current assets (7,983) (2,824)
Accounts payable (20,528) (20,618)
Taxes accrued, including federal income 12,979 23,107
Interest accrued 8,584 8,724
Other current liabilities 20,416 (8,685)
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Net cash from operating activities 221,301 198,702
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CASH FLOWS FROM INVESTING ACTIVITIES
Construction expenditures (305,174) (275,907)
Allowance for other funds used during
construction 8,682 6,676
Utility system acquisitions (7,288) (42,535)
Proceeds from the disposition of property,
plant and equipment 2,730 2,950
Removal costs from property, plant and
equipment retirements (2,694) (4,695)
Funds restricted for construction activity (16,762) (12,870)
-------- --------
Net cash used in investing activities (320,506) (326,381)
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<PAGE> Page 10 FORM 10-Q
Nine Months Ended
September 30,
1999 1998
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<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt $118,237 $256,700
Proceeds from common stock 27,745 21,403
Purchase of common stock for treasury (1,190) --
Net borrowings under
line-of-credit agreements 31,277 (47,322)
Advances and contributions for construction,
net of refunds 32,418 30,402
Debt issuance costs (3,685) (6,022)
Repayment of long-term debt (46,790) (59,127)
Redemption of preferred stocks (3,097) (1,168)
Dividends paid (61,521) (56,422)
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Net cash from financing activities 93,394 138,444
-------- --------
Net increase (decrease) in cash and
cash equivalents (5,811) 10,765
Cash and cash equivalents at January 1 51,794 30,814
-------- --------
Cash and cash equivalents at September 30 $ 45,983 $ 41,579
======== ========
Cash paid during the period for:
Interest, net of capitalized amount $124,205 $116,627
======== ========
Income taxes $ 42,266 $ 43,523
======== ========
Common stock issued in lieu of cash in connection with the Employees' Stock
Ownership Plan, the Savings Plan for Employees and the Long-Term
Performance-Based Incentive Plan totaled $4,750 in 1999 and $6,210 in 1998.
Common stock placed into treasury in connection with the Long-Term
Performance-Based Incentive Plan totaled $3,675 in 1999.
The results presented in 1999 and the restated results for 1998 reflect the
pooling of interests method of accounting to recognize the recent acquisition
of National Enterprises Inc.
The accompanying information and notes are an integral part of these
financial statements.
</TABLE>
<PAGE> Page 11 FORM 10-Q
AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES
-----------------------------------------------------------
Information Accompanying Financial Statements (Unaudited)
(In thousands, except share and per share amounts)
September 30 December 31
1999 1998
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Preferred stocks with mandatory redemption requirements
Cumulative preferred stock - $25 par value
Authorized - 1,770,000 shares
8.50% series (non-voting) - 1,600,000 shares
outstanding $ 40,000 $ 40,000
========== ===========
Preferred stocks without mandatory redemption requirements
Cumulative preferred stock - $25 par value
5% series (one-tenth of a vote per share)
- 101,777 shares outstanding $ 2,544 $ 2,544
Cumulative preference stock - $25 par value
Authorized - 750,000 shares
5% series (non-voting) - 365,158 shares
outstanding 9,129 9,129
Cumulative preferential stock - $35 par value
Authorized - 3,000,000 shares
(one-tenth of a vote per share) -- --
---------- -----------
$ 11,673 $ 11,673
========== ===========
The terms of the 8.50% preferred stock provide that all shares of the series
shall be redeemed on December 1, 2000.
Common stockholders' equity
Common stock - $1.25 par value
Authorized - 300,000,000 shares
Issued - 96,940,815 shares at Sept. 30, 1999;
95,831,790 at December 31, 1998 $ 121,176 $ 119,790
Paid-in capital 415,159 384,254
Retained earnings 990,304 945,434
Accumulated other comprehensive income 78,212 33,138
Unearned compensation (1,165) (980)
Treasury stock at cost - 109,675 shares at (3,700) (25)
Sept. 30, 1999; 800 shares at December 31, 1998 ---------- -----------
$1,599,986 $ 1,481,611
========== ===========
At September 30, 1999, common shares authorized but not issued, reserved for
issuance in connection with the Company's stock plans were 80,865,863 shares
for the Stockholder Rights Plan, 4,527,120 shares for the Dividend
Reinvestment and Stock Purchase Plan, 597,627 shares for the Employees' Stock
Ownership Plan, 648,253 shares for the Savings Plan for Employees and 296,347
shares for the Long-Term Performance-Based Incentive Plan.
The results presented in 1999 and the restated results for 1998 reflect the
pooling of interests method of accounting to recognize the recent acquisition
of National Enterprises Inc.
<PAGE> Page 12 FORM 10-Q
AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES
-----------------------------------------------------------
Notes to Consolidated Financial Statements (Unaudited)
NOTE 1 -- Financial Statement Presentation
The information presented in this Form 10-Q is unaudited. In the opinion of
management the information reported reflects all adjustments, consisting of
normal recurring adjustments, which were necessary to a fair statement of the
results for the periods reported. Certain reclassifications have been made
to conform previously reported data to the current presentation. The results
presented in 1999 and the restated results for 1998 reflect the pooling of
interests method of accounting to recognize the recent acquisition of
National Enterprises Inc.(NEI).
NOTE 2 -- Acquisition of National Enterprises Inc.
On June 25, 1999, American Water Works Company, Inc. (the Company) completed
the acquisition of NEI in a transaction valued at $700 million. Subsidiaries
of NEI, a privately owned company, provide water service to approximately
504,000 customers in Missouri, Illinois, Indiana and New York. The
transaction was accomplished through a tax free exchange of 14,937,000 shares
of the Company's stock for all of the outstanding shares of NEI and the
assumption of $241 million of debt.
This business combination has been accounted for as a pooling of interests
and, accordingly, the consolidated financial statements for periods prior to
the combination have been restated to include the accounts and results of
operations of NEI.
During the third quarter of 1999, the Company recorded a charge of $6.5
million, and related tax benefits of $2.4 million, reflecting the remainder
of the one-time costs incurred in connection with the merger. Merger costs
for the first nine months of 1999 amounted to $20.5 million with related tax
benefits of $7.6 million. The merger related costs consist primarily of
severance costs as well as vesting of certain benefits, professional fees and
other costs. The merger related costs have been reported on a separate line
in the Consolidated Statements of Income and Comprehensive Income.
The restated financial statements also reflect other comprehensive income
related to NEI's publicly traded investments, primarily ITC Deltacom and
Powertel. Investments in publicly traded securities are classified as
available for sale and are recorded in the balance sheet at fair market value
with the difference between cost and market value, net of the tax effect,
recorded as a part of other comprehensive income. The fair value of
investments is determined using quoted market prices.
Note 3 -- Pending Acquisitions
On July 13, 1999, the Company announced it had agreed to acquire from United
Water Resources Inc. several water utilities in Missouri, Indiana, Illinois
and Virginia for approximately $49 million in cash. These water utilities
provide water service to 35,000 customers.
On October 1, 1999, the Company announced it had agreed to purchase Anglian
Water Plc.'s interest in the two companies' joint venture, AmericanAnglian
Environmental Technologies, L.P. (AAET). AAET manages and operates 146 water
and wastewater facilities and is the seventh largest contract operations
firm in the United States.
<PAGE> Page 13 FORM 10-Q
On October 18, 1999, the Company announced it had agreed to acquire the water
and wastewater utility assets of Citizens Utilities Company for $835 million
in cash and debt. Citizens Utilities provides water and wastewater service
to 305,000 customers in Arizona, California, Illinois, Indiana, Ohio and
Pennsylvania.
On October 29, 1999, the Company announced an agreement had been reached to
acquire all the common stock of SJW Corp. for approximately $390 million in
cash, or $128 per share, and the assumption of $90 million in debt. SJW
Corp., through its subsidiary San Jose Water Company, provides water service
to 216,000 customers in San Jose, California and nearby communities.
NOTE 4 -- New Accounting Standard
In 2001, the Company will adopt Statement of Financial Accounting Standards
No. 133 "Accounting for Derivative Instruments and Hedging Activities" (SFAS
133). This statement establishes accounting and reporting standards for
derivative instruments and hedging activities. SFAS 133 was issued by the
Financial Accounting Standards Board in June of 1998 and requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
SFAS 133, as amended by SFAS 137 "Accounting for Derivative Instruments and
Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133",
requires adoption on January 1, 2001. As of September 30, 1999, the Company
had no significant derivative instruments or hedging activities.
<PAGE> Page 14 FORM 10-Q
PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
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Results of Operations
- ---------------------
Operating revenues for the third quarter and the first nine months of 1999
were higher than for the same periods of 1998 by 6%. The increased water
revenues were due to increased water usage during extended periods of hot and
dry summer weather experienced in a number of subsidiary service territories,
ongoing customer growth and rate increases authorized by regulatory agencies.
Water sales volume during the third quarter of 1999 increased to 105.2
billion gallons from 99.6 billion gallons in the third quarter of 1998.
Record third quarter 1999 sales in the newly acquired Midwest operations of
NEI substantially offset the impact of the drought related restrictions in
the East, reflecting a benefit of the Company's ongoing efforts to increase
geographic diversity. The sales volume for the first nine months of 1999 was
259.7 billion gallons compared to 249.0 billion gallons sold in the same
period of 1998.
During the first ten months of 1999, utility subsidiaries received eight rate
orders which are expected to provide approximately $29.2 million in
additional annual revenues. The largest of these were orders received by New
Jersey-American Water Company increasing annual revenues by $13.1 million
effective April 6, 1999 and by Indiana-American Water Company increasing
annual revenues by $13.2 million effective October 15, 1999. Eight
subsidiaries have rate increase applications on file before regulatory
agencies which, if granted in full, would provide approximately $67 million
in additional annual revenues. Approximately $40 million is attributable to
a rate case filed by Pennsylvania-American Water Company, which expects to
receive an order by January 2000.
Operation and maintenance expenses in the third quarter and the first nine
months of 1999 compared to the same periods in 1998 increased by 5% and 6%,
respectively. Operation and maintenance expenses in the third quarter and
the first nine months of 1999 included $1.4 million and $4.6 million of costs
incurred by subsidiaries defending condemnation initiatives in Chattanooga,
Tennessee, and Peoria, Illinois. In October, the Company was informed by the
City Council of Chattanooga that it had decided to end its year-long attempt
to take over the Tennessee-American Water Company. Increased operation and
maintenance expenses also reflects adverse winter weather experienced at
several subsidiaries during the first quarter. Depreciation and general tax
expense was higher for the third quarter and first nine months of 1999 when
compared to the same periods of 1998 due to the Company's ongoing program of
utility plant construction.
Interest expense rose by 4% and 6% in the third quarter and first nine months
of 1999 compared to the same period in 1998, primarily due to an increase in
total debt to fund construction of new water service assets. The total
allowance for funds used (equity and borrowed) during construction (" AFUDC")
recorded in the third quarter of 1999 was $5.6 million, compared to $4.2
million in the third quarter of 1998. AFUDC for the first nine months of
1999 was $16.9 million compared to $10.6 million for the same period in 1998.
The utility subsidiaries record AFUDC to the extent permitted by the
regulatory authorities.
<PAGE> Page 15 FORM 10-Q
During the third quarter and the first nine months of 1999 the Company
recorded merger related costs amounting to $6.5 and $20.5 million,
respectively.
Income taxes were equal in the third quarter and decreased in the first nine
months of 1999 when compared to the comparable periods in 1998, as a result
of decreased earnings due to merger related costs.
Net income to common stock was $51.9 million for the third quarter of 1999
compared with $52.6 million for the same period in 1998. Net income to
common stock for the first nine months of 1999 was $103.4 million compared
with $113.9 million for the first nine months of 1998.
Before one-time merger costs of $4.1 million after taxes, net income to
common stock for the third quarter of 1999 was $55.9 million compared to
$52.6 million for same period in 1998. For the first nine months of 1999,
net income to common stock was $116.3 million excluding $12.9 million of
merger costs after taxes compared with $113.9 million for the first nine
months of 1998.
Capital Resources and Liquidity
- -------------------------------
During the first nine months of 1999, 818,480 shares of common stock were
issued in connection with the Dividend Reinvestment and Stock Purchase Plan,
109,932 shares were issued in connection with the Employees' Stock Ownership
Plan, 149,825 shares were issued in connection with the Savings Plan for
Employees and 30,788 shares were issued in connection with the Long-Term
Performance-Based Incentive Plan.
During the balance of 1999, the Company plans to issue shares of common stock
through its Dividend Reinvestment and Stock Purchase Plan, and the Savings
Plan for Employees. Proceeds from the issuance of common stock will fund
additional equity investments in subsidiaries.
The Company placed 108,875 shares of common stock into treasury in connection
with the Long-Term Performance-Based Incentive Plan in the first nine months
of 1999.
Four subsidiaries issued $118.2 million of long-term debt during the first
nine months of 1999.
In the first nine months of 1999, the Company invested $34.1 million in the
common stock of four subsidiaries. It is anticipated that some subsidiaries
will sell long-term debt to institutional investors and common stock to the
Company during the remainder of 1999, with the proceeds used to fund
construction programs, continue acquisitions and repay bank loans.
Year 2000 Issues
- ----------------
Many computer systems in use today were designed and developed without regard
to the impact of the upcoming century change. Computer programs and devices
often use only two digits for the year to identify dates. As a result,
computer systems may fail completely or create erroneous results unless
corrective measures are taken.
<PAGE> Page 16 FORM 10-Q
The Company utilizes numerous computerized systems and date sensitive devices
in its operations. If some of these key systems and devices are not ready
for the Year 2000 there will likely be adverse effects on the Company's
business, results of operations, and financial condition. The Company is
also dependent on third parties that supply important materials and services
such as water treatment chemicals, electric power for pumps and the
processing of customer payments. The failure of some of these third parties
to be Year 2000 compliant on a timely basis would also have an adverse effect
on the Company. The Company has assigned a very high priority to its Year
2000 compliance efforts, and as discussed below, these efforts have been
substantially completed.
An inventory of all important computer programs and devices with embedded
technology has been prepared for each utility subsidiary. Those inventories
are being used to track the status of any necessary upgrades or replacements,
and to log the results of testing by Company personnel to ensure that all
important systems are in fact Year 2000 compliant. In some instances work on
other information technology projects has been delayed because of Year 2000
remediation projects, but these delays are not expected to have a significant
impact on the Company's operations.
Because the Company is particularly dependent on its computerized financial,
customer service and treatment plant automation systems, those systems are
the primary areas in which Year 2000 efforts are focused.
The Company has been implementing two new software packages for financial and
customer service applications that are Year 2000 compliant. Although the
decision to purchase and implement this software was based on an analysis of
all of the Company's current and future systems requirements, once the
decision was made these projects became a key part of the Company's Year 2000
compliance plan. In conjunction with these projects, midrange and personal
computers have been upgraded with hardware and operating systems that are
Year 2000 compliant.
In the second quarter of 1999, the implementation of the new Year 2000
compliant enterprise software for financial applications was completed. This
new software will also be implemented by the utility subsidiaries acquired
from NEI, whose current financial software is Year 2000 compliant.
As of August 1999, all of the customer service software in use was Year 2000
compliant. The new customer service software is currently being used by
three of the Company's largest subsidiaries. Implementation of the new
customer service software will continue beyond 1999, so the customer service
software currently used by the other subsidiaries has been made Year 2000
compliant.
Many of the Company's water treatment plants utilize automation systems that
are controlled by personal computers. These systems have been tested, and
are being upgraded if necessary. That work has been substantially completed,
and the control systems at most facilities are now year 2000 compliant. The
Company's production and distribution facilities also utilize many pieces of
equipment with embedded microcontroller chips. These chips, which may be
time/date sensitive, are an integral part of critical operating equipment.
Much of this equipment cannot be field tested to evaluate Year 2000
compliance, so the Company used a systematic approach to identify and resolve
this issue, and that was completed during the first quarter of 1999. As a
contingency, the Company's production and distribution facilities can be
operated manually in the event of an internal Year 2000 related failure.
<PAGE> Page 17 FORM 10-Q
In addition to the work being done on the Company's internal systems,
interfaces used to exchange information with banks and other entities are
being tested to ensure Year 2000 compliance. And where feasible, plans are
being formulated to minimize the impact of problems outside parties may have
in providing supplies and services.
The cost of the new financial and customer service software, implementation
consulting services, and the cost of upgrading and replacing computers and
other equipment will be capitalized by the utility subsidiaries and included
in future rate increase requests. The total cost of these capital projects
is expected to be approximately $46 million, of which approximately $44
million has been incurred to date. Costs for specific Year 2000 remediation
projects will be charged to expense unless they meet the requirements for
deferral as regulatory assets. However, current period expenses are not
expected to be materially different from the usual ongoing level of
information systems related expenses.
New Accounting Standards
- ------------------------
In 2001, the Company will adopt Statement of Financial Accounting Standards
No. 133 "Accounting for Derivative Instruments and Hedging Activities" (SFAS
133). This statement establishes accounting and reporting standards for
derivative instruments and hedging activities. SFAS 133 was issued by the
Financial Accounting Standards Board in June of 1998 and requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
SFAS 133, as amended by SFAS 137 "Accounting for Derivative Instruments and
Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133",
requires adoption on January 1, 2001. As of September 30, 1999, the Company
had no significant derivative instruments or hedging activities.
Forward Looking Information
- ---------------------------
Forward looking statements in this report, including, without limitation,
statements relating to the Company's plans, strategies, objectives,
expectations, intentions and adequacy of resources, are made pursuant to the
safe harbor provisions of the U.S. Private Securities Litigation Reform Act
of 1995. These forward looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be materially different from
any future results, performance or achievements expressed or implied by such
forward looking statements. These factors include, among others, the
following: general economic and business conditions; competition; success of
operating initiatives, advertising and promotional efforts; existence of
adverse publicity or litigation; changes in business strategy or plans;
quality of management; availability, terms and development of capital;
business abilities and judgment of personnel; changes in, or the failure to
comply with governmental regulations; Year 2000 issues; and other factors
described in filings of the Company with the SEC. The Company undertakes no
obligation to publicly update or revise any forward looking statement,
whether as a result of new information, future events or otherwise.
<PAGE> Page 18 FORM 10-Q
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
A. Exhibits
--------
Exhibit Number Description
- -------------- -----------
3 Articles of Incorporation and By-laws
By-laws of the Registrant, as amended to October 14,
1999 is filed herewith.
10 Material Contracts
Amendment dated October 1, 1999 to Consulting Agreement
between Registrant and Anthony P. Terracciano, is filed
herewith.
27 Financial Data Schedule
Financial Data Schedule, is filed herewith
electronically.
B. Reports on Form 8-K
-------------------
No report on Form 8-K was filed by the registrant during the quarter ended
September 30, 1999.
<PAGE> Page 19 FORM 10-Q
SIGNATURES
- ----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN WATER WORKS COMPANY, INC.
Date November 10, 1999 \s\Ellen C. Wolf
- ---------------------- --------------------------------------
Chief Financial Officer
(Authorized Officer)
Date November 10, 1999 \s\Robert D. Sieves
- ---------------------- --------------------------------------
Comptroller
(Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> OPUR1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 4,804,086
<OTHER-PROPERTY-AND-INVEST> 109,195
<TOTAL-CURRENT-ASSETS> 284,303
<TOTAL-DEFERRED-CHARGES> 514,859
<OTHER-ASSETS> 65,549
<TOTAL-ASSETS> 5,777,992
<COMMON> 117,476
<CAPITAL-SURPLUS-PAID-IN> 413,994
<RETAINED-EARNINGS> 990,304
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,599,986
76,064
17,928
<LONG-TERM-DEBT-NET> 2,396,817
<SHORT-TERM-NOTES> 119,867
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 60,580
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,506,750
<TOT-CAPITALIZATION-AND-LIAB> 5,777,992
<GROSS-OPERATING-REVENUE> 949,969
<INCOME-TAX-EXPENSE> 71,557
<OTHER-OPERATING-EXPENSES> 627,400
<TOTAL-OPERATING-EXPENSES> 698,957
<OPERATING-INCOME-LOSS> 251,012
<OTHER-INCOME-NET> (11,367)
<INCOME-BEFORE-INTEREST-EXPEN> 239,645
<TOTAL-INTEREST-EXPENSE> 133,254
<NET-INCOME> 106,391
2,988
<EARNINGS-AVAILABLE-FOR-COMM> 103,403
<COMMON-STOCK-DIVIDENDS> 58,533
<TOTAL-INTEREST-ON-BONDS> 119,508
<CASH-FLOW-OPERATIONS> 221,301
<EPS-BASIC> 1.07
<EPS-DILUTED> 1.07
</TABLE>
AMERICAN WATER WORKS COMPANY, INC.
BY-LAWS
Adopted April 16, 1970
As Amended to October 14, 1999
AMERICAN WATER WORKS COMPANY, INC.
BY-LAWS
Adopted April 16, 1970
As Amended to October 14, 1999
Article I
SHAREHOLDERS
Section 1. [As amended January 2, 1986, and further amended July 6, 1989
and May 6, 1999] The annual meeting of the stockholders of the Corporation
shall be held at its office at 1025 Laurel Oak Road, Voorhees, New Jersey, on
the first Thursday in May of each year (or if said day be a legal holiday,
then on the next succeeding day not a holiday), at eleven o'clock in the
forenoon, daylight saving time or standard time whichever shall be legally in
effect in the Township of Voorhees, New Jersey, on that date, or on such other
date or at such other time or at such other place within the continental United
States as may be designated in the notice of the annual meeting, for the
purpose of electing directors to a Class in accordance with Article Twelfth of
the Company's Certificate of Incorporation, and for the transaction of such
other business as may properly be brought before the meeting.
Section 2. [As amended July 6, 1989 and further amended February 4, 1999]
Special meetings of the stockholders may be held only upon call of the Board of
Directors or the Executive Committee or the Chairman of the Board or the
President, at such place and at such time and date as may be fixed by the body
or person or persons giving such call, and as may be stated in the notice
setting forth such call.
Section 3. [As amended July 6, 1989] Notice of the place, time and date of
every meeting of stockholders shall be delivered personally or mailed at
least ten days prior thereto to each stockholder of record entitled to vote at
such meeting at his address as it appears on the records of the Corporation.
Such further notice shall be given as may be required by law.
Section 4. Except as otherwise provided by law or in the Certificate of
Incorporation, as amended, of the Corporation, at all meetings of the
stockholders the presence in person or the representation by proxy of the
holders of the outstanding shares that would be entitled to cast at least
a majority of votes on a particular matter shall constitute a quorum for the
purpose of considering such matter. If there be no such quorum present for
considering a particular matter, the meeting on such matter may be adjourned
from time to time, by vote of a majority of those present or represented
and entitled to vote on such matter, without notice other than by
announcement at the meeting, until such a quorum be present.
<PAGE>
Section 5. Meetings of the stockholders shall be presided over by the
Chairman of the Board, the Vice Chairman of the Board or the President or, if
none of such officers is present, by a Vice President or, if no such officer is
present, by a chairman to be chosen at the meeting. The Secretary of the
Corporation or, in his absence, an Assistant Secretary, or in the absence of
both the Secretary and an Assistant Secretary, a person appointed by the
Chairman of the meeting shall act as secretary of the meeting.
Section 6. Any stockholder entitled to vote at any meeting of
stockholders may so vote in person or by proxy, but no proxy shall be acted upon
after three years from its date, unless such proxy provides for a longer period.
Section 7. [As amended January 2, 1986 and further amended March 5, 1992]
At all elections of directors by the stockholders of the Corporation, each
stockholder shall be entitled to vote as provided in the Certificate of
Incorporation, as amended, of the Corporation. The Chairman of the Board or
the chairman of each meeting at which directors are to be elected shall
appoint aninspector of election, unless such appointment shall be unanimously
waived by those stockholders present or represented by proxy at the meeting
and entitled to vote at the election of directors. No director or candidate
for the office of director shall be appointed as such inspector. Before
undertaking his duties at any such meeting, the inspector shall take and
subscribe an oath or affirmation faithfully to execute the duties of
inspector at such meeting, with strict impartiality and
according to the best of his ability, and shall take charge of the polls and
after the balloting shall make a certificate of the result of the vote taken.
Section 8. In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights
in respect of any change,conversion or exchange of stock or for the purpose
of any other lawful action, the Board of Directors may fix, in advance, a
record date, which shall not be more than sixty nor less than ten days before
the date of such meeting, or such other action.
Section 9. Any action required or permitted to be taken at any meeting
of stockholders may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous consent shall be given to those stockholders who have not
consented in writing.
<PAGE>
Article II
BOARD OF DIRECTORS
Section 1. (a) [As amended January 16, 1975 and further amended May 4,
1989, March 5, 1992 (effective May 7, 1992), September 4, 1997, March 5, 1998
(effective May 7, 1998), October 1, 1998 and July 1, 1999] The Board of
Directors shall consist of fifteen directors, but the number of directors may be
increased or decreased from time to time, within the limits as to the number
specified in the Certificate of Incorporation, as amended, of the Corporation,
in the manner hereinafter provided for amendment of the By-laws of the
Corporation, but subject to Article Eleventh of the Certificate of
Incorporation, as amended.
(b) [Added May 6, 1999] The members of the Board of Directors shall be
divided into classes in a manner provided by Article Twelfth of the
Corporation's Certificate of Incorporation and shall be elected and serve for
such terms of office as are provided therein.
(c) [As amended January 16, 1975, and further amended March 5, 1992 and
May 6, 1999] A majority of the number of directors shall constitute a quorum;
provided, however, no amendment of this sentence shall be adopted which is in
violation of the provisions of paragraph (h) of Section 1 of Division D of
Article FOURTH of the Certificate of Incorporation, as amended.
(d) [As amended January 16, 1975, and further amended August 26, 1976,
December 21, 1978, June 19, 1980, February 16, 1984 (effective June 1, 1984),
January 2, 1986, January 6, 1994 and May 6, 1999] (i) No person shall be
eligible for election to the Board of Directors of the Corporation in any
year if such person shall be 72 years of age or older on the first day of the
year of such election.
(ii) Each member of the Board of Directors who ceases to be a
director for any reason other than death after reaching the age of 65 shall
thereupon become a Director Emeritus and shall serve as a Director Emeritus
until the date of the second Annual Meeting following the date when such
person first became a Director Emeritus. Each Director Emeritus will have the
right to receive notice of meetings and to attend meetings of the Board of
Directors and of each Committee thereof on which such Director Emeritus was
serving immediately prior to becoming a Director Emeritus but will not have
the right to vote on matters which come before the Board of Directors or any
committee thereof.
Section 2. [As amended May 6, 1999] Vacancies in the Board of Directors
shall be filled by a majority of the remaining directors though less than a
quorum and a director so chosen shall hold office for the balance of the
unexpired term of the class to which elected and until the election and
qualification of his successor. In case of any increase in the number of
directors as provided in Section 1 of this Article II, the stockholders or
the Board of Directors (by a majority of the directors constituting the Board
prior to such increase), as the case may be, may, at the meeting at which such
increase is voted, or at any adjournment or adjournments thereof, elect such
additional directors as shall be required, and the directors so chosen shall
hold office for the balance of the unexpired term of the class to which elected
and until the election and qualification of their respective successors.
Section 3. Meetings of the Board of Directors shall be held at such place
as may from time to time be fixed by resolution of the Board or as may be
specified in the call of any meeting. Regular meetings of the Board of
Directors shall be held at such times as may from time to time be fixed by
resolution of the Board; and special meetings may be held at any time upon
the call of the Executive Committee or of the Chairman of the Board or the
President, by oral, telegraphic or written notice, duly served on or sent or
mailed to each director not less than two days before the meeting. A meeting of
the Board may be held without notice immediately after the annual meeting of
stockholders at the same place at which such annual meeting is held. Notice
need not be given of regular meetings of the Board held at times fixed by
resolution of the Board.
Section 4. [As amended June 4, 1998] The Board of Directors may, by
resolution or resolutions, passed by a majority of the whole Board, designate an
Executive Committee, to consist of two or more of the directors, as the Board
may from time to time determine. The Executive Committee shall have and may
exercise, when the Board is not in session, all the powers of the Board of
Directors in the management of the business and affairs of the Corporation, and
shall have power to authorize the seal of the Corporation to be affixed to all
papers which may require it; provided that the Executive Committee shall not
have or exercise any such power or powers if and so long as a "two years'
default in preferred dividends," as defined in subdivision (f) of Section 1 of
Division D of Article FOURTH of the Certificate of Incorporation, as amended, of
the Corporation shall exist. The Executive Committee shall not have power to (i)
fill vacancies in the Board, (ii) to change the membership of or to fill
vacancies in this or any Committee of the Board, (iii) approve or adopt, or
recommend to the stockholders, any action or matter expressly required by the
laws of Delaware to be submitted to stockholders for approval and (iv) adopt,
amend or repeal any by-law of the Corporation. The Board shall have the power
at any time to change the membership of the Executive Committee, to fill
vacancies in it, or to dissolve it. The Board of Directors shall also have the
power to designate one or more alternate members of said Executive Committee,
which alternate members shall have power to serve, subject to such conditions as
the Board of Directors may prescribe, as a member or members of said Executive
Committee during the absence or inability to act of any one or more members
of said Committee. The Executive Committee may make rules for the conduct of
its business and may appoint such committees and assistants as it shall from
time to time deem necessary. A majority of the members of the Executive
Committee shall constitute a quorum.
Section 5. The Board of Directors may also, by resolution or resolutions,
passed by a majority of the whole Board, designate one or more other committees,
each such committee to consist of one or more of the directors of the
Corporation, which, to the extent provided in said resolution or resolutions,
shall have and may exercise the powers of the Board of Directors in the
management of the business affairs of the Corporation, and may have power to
authorize the seal of the Corporation to be affixed to all papers which may
require it; provided that no such committee shall have or exercise any such
power or powers if and so long as a "two years' default in preferred
dividends," as defined in subdivision (f) of Section 1 of Division D of Article
FOURTH of the Certificate of Incorporation, as amended, of the Corporation shall
exist. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors. A
majority of the members of any such committee may determine its action and
fix the time and place of its meetings unless the Board of Directors shall
otherwise provide. The Board of Directors shall have power at any time to
change the membership of, to fill vacancies in, or dissolve any such committee.
Section 6. One or more of members of the Board of Directors or any
committee thereof may participate in a meeting of the Board or a committee
thereof by means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other.
Section 7. [As amended May 17, 1984 (effective June 1, 1984) and further
amended May 4, 1988 and October 14, 1999] The Board in its discretion may
choose a Chairman of the Board and a Vice Chairman of the Board from among the
directors. The Chairman of the Board shall preside at all meetings of the
stockholders (except as otherwise provided by statute) and of the Board
of Directors, and shall have such other powers and duties as may from time to
time be prescribed by the Board of Directors, but shall not participate in the
day-to-day management or operations of the Corporation except as provided in
Section 3 of Article III in the event of a vacancy in the office of President.
The Vice Chairman of the Board shall assist the Chairman of the Board in
carrying out the Chairman's duties and, in the absence of the Chairman of the
Board, shall have the powers and duties of the Chairman of the Board. The Vice
Chairman shall also have such other powers and duties as may from time to time
be assigned to such officer by the Board of Directors.
Section 8. [As amended January 16, 1975] In addition to reimbursement of
his reasonable expenses incurred in attending meetings or otherwise in
connection with his attention to the affairs of the Corporation, each Director
and each Director Emeritus as such, and as a member of the Executive Committee
or of any other committee of the Board of Directors, shall be entitled to
receive such compensation as may be fixed from time to time by the Board of
Directors, subject to any applicable restriction imposed by the Certificate of
Incorporation, as amended, of the Corporation.
Section 9. [As amended February 4, 1987] (a) The Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
such person is or was a director, officer or employee of the Corporation or a
constituent Corporation absorbed in a consolidation or merger or is or was
serving at the request of the Corporation or a constituent Corporation absorbed
in a consolidation or merger, as a director, officer or employee of another
Corporation, partnership, joint venture, trust or other enterprise, including an
employee benefit plan, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding to
the extent that such person is not otherwise indemnified and to the extent
that such indemnification is not prohibited by applicable law. For this
purpose the Board of Directors may, and on request of any such person shall be
required to, determine in each case whether or not the applicable standards
in any applicable statute have been met, or such determination shall be made
by independent legal counsel if the Board of Directors so directs or if the
Board of Directors is not empowered by statute to make such determination.
Expenses incurred by an officer, director or employee of the Corporation in
defending a civil or criminal action, suit or proceeding shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding subject to the provisions of any applicable statute. The
obligations of the Corporation to indemnify a director, officer or employee
under this Article II, including the duty to advance expenses, shall be
considered a contract between the Corporation and such individual, and no
modification or repeal of any provision of this Article II shall affect, to the
detriment of the individual, such obligations of the Corporation in connection
with a claim based on any act or failure to act occurring before such
odification or repeal.
(b) The indemnification and advancement of expenses provided by this
Article II shall not be deemed exclusive of any other right to which one
indemnified may be entitled, both as to action in such person's official
capacity and as to action in another capacity while holding such office, and
shall inure to the benefit of the heirs, executors and administrators of any
such person.
(c) The Board of Directors shall have the power to (i) authorize the
Corporation to purchase and maintain, at the Corporation's expense, insurance on
behalf of the Corporation and on behalf of others to the extent that power to do
so has been or may be granted by statute, and (ii) give other indemnification to
the extent permitted by law.
Article III
OFFICERS
Section 1. [As amended October 14, 1999] The Board of Directors as soon as
may be after its election shall choose a President of the Corporation, one or
more Vice Presidents, a Secretary and a Treasurer and from time to time may
appoint such Assistant Secretaries, Assistant Treasurers and such other
officers, agents and employees as it may deem proper. The President shall
be chosen from among the directors.
Section 2. The term of office of each officer shall be one year, or until
his successor is elected and qualified or until his earlier resignation or
removal. Any officer may resign at any time upon written notice to the
Corporation. Any officer may be removed from office at any time by the
affirmative vote of a majority of the members of the Board then in office.
Section 3. The President shall be the chief executive officer of the
Corporation and shall supervise the carrying out of the policies adopted or
approved by the Board. He shall have general power to execute bonds, deeds
and contracts in the name of the Corporation and to affix the corporate seal;
to appoint and fix the compensation of all employees and agents of the
Corporation whose appointment is not otherwise provided for; to remove or
suspend such employees or agents as shall not have been appointed by the Board
of Directors, and to exercise all the powers usually appertaining to the chief
executive officer of a corporation, except those required by statute or by
these by-laws to be exercised by another officer. In the absence of the
Chairman and the Vice Chairman of the Board, he shall preside at all meetings of
the stockholders and of the Board of Directors. In the event of a vacancy in
the office of President, the powers and duties of the President as chief
executive officer of the Corporation shall, without further action of any kind,
devolve upon and to the Chairman of the Board. Upon the filling of such
vacancy, such powers and duties as chief executive officer shall, without
further action of any kind, revert to the President of the Corporation.
Section 4. The several Vice Presidents shall perform all such duties and
services as shall be assigned to or required of them, from time to time, by the
Board of Directors or the President, respectively, and, unless their authority
be expressly limited, shall act, in the order of their election, in the place of
the President, exercising all his powers and performing his duties, during his
absence or disability.
Section 5. Subject to such limitations as the Board of Directors may from
time to time prescribe, the other officers of the Corporation shall each have
such powers and duties as generally pertain to their respective offices, as well
as such powers and duties as from time to time may be conferred by the Board of
Directors. Any officer, agent or employee of the Corporation may be required to
give bond for the faithful discharge of his duties, in such sum and with such
surety or sureties as the Board of Directors may from time to time prescribe.
Article IV
CERTIFICATES OF STOCK
Section 1. [As amended January 2, 1986] The interest of each stockholder
of the Corporation shall be evidenced by certificates for shares of stock in
such form as the Board of Directors may from time to time prescribe. The shares
in the stock of the Corporation shall be transferable on the books of the
Corporation by the holder thereof in person or by his attorney, upon
compliance with Section 3 below or upon surrender for cancellation of
certificates for the same number of shares, with an assignment and power of
transfer endorsed thereon or attached thereto, duly executed, and with such
proof of the authenticity of the signature as the Corporation or its
agents may reasonably require.
Section 2. [As amended January 8, 1998] The certificates of stock shall be
signed by the Chairman of the Board, the President or a Vice President and by
the Secretary or the Treasurer or an Assistant Secretary or an Assistant
Treasurer of the Corporation (except that where any such certificate is manually
countersigned by a transfer agent other than the Corporation or its employee
or by a registrar other than the Corporation or its employee, any other
signature on the certificate may be facsimile, engraved or printed), shall be
sealed with the seal of the Corporation (or shall bear a facsimile of such seal,
engraved or printed) and shall be countersigned and registered in such manner,
if any, as the Board of Directors may by resolution prescribe. In case any
officer or officers who shall have signed, or whose facsimile signature or
signatures shall have been used on any such certificate or certificates, shall
cease to be such officer or officers of the Corporation, whether because of
death, resignation or otherwise, before such certificate or certificates shall
have been delivered by the Corporation, such certificate or certificates may
nevertheless be adopted by the Corporation and be issued and delivered as though
the person or persons who signed such certificate or certificates, or
whose facsimile signature or signatures shall have been used thereon, had
not ceased to be such officer or officers of the Corporation.
Section 3. No certificate for shares of stock in the Corporation shall be
issued in place of any certificate alleged to have been lost, stolen or
destroyed, except upon production of such evidence of such loss, theft or
destruction and upon delivery to the Corporation of a bond of indemnity in such
amount, upon such terms and with such surety, as the Board of Directors in its
discretion may require.
Article V
CORPORATE RECORDS
The books and records of the Corporation may be kept outside of Delaware
at such other place or places as the Board of Directors may from time to time
determine.
Article VI
CHECKS, NOTES, ETC.
All checks and drafts on the Corporation bank accounts and all bills of
exchange and promissory notes, and all acceptances, obligations and other
instruments for the payment of money, shall be signed by such officer or
officers or agent or agents or other employee or employees as shall be thereunto
authorized from time to time by the Board of Directors.
Article VII
FISCAL YEAR
The fiscal year of the Corporation shall begin on the first day of January
in each year and shall end on the thirty-first day of December following.
<PAGE>
Article VIII
CORPORATE SEAL
The corporate seal shall have inscribed thereon the name of the Corporation
and the words "Incorporated Delaware 1936." In lieu of the corporate seal, when
so authorized by the Board of Directors or a duly empowered committee thereof,
and permitted by law, a facsimile thereof may be impressed or affixed or
reproduced.
Article IX
OFFICES
The Corporation and the stockholders and the directors may have offices
outside of the State of Delaware at such places as shall be determined from time
to time by the Board of Directors.
Article X
AMENDMENTS
[As amended May 4, 1989] Subject to the provisions of Section 1 of
Division D of Article Fourth and of Article Eleventh of the Certificate of
Incorporation, as amended, of the Corporation, the by-laws of the Corporation,
regardless of whether made by the stockholders or by the Board of
Directors, may be altered, added to, or repealed at any meeting of the Board of
Directors or of the stockholders, provided notice of the proposed change is
given in the notice of the meeting. No change of the time or place for the
annual meeting of the stockholders for the election of directors shall be made
except in accordance with the Certificate of Incorporation, as amended, of the
Corporation and the laws of Delaware.
THIRD AMENDMENT TO CONSULTING AGREEMENT
This is the Third Amendment to the Consulting Agreement dated May 7, 1998 by
and between Anthony P. Terracciano, an individual whose mailing address is 1123
3rd Avenue, Spring Lake, New Jersey 07762 ("Consultant") and American Water
Works Company, Inc. (the "Company"), a Delaware corporation.
BACKGROUND
Consultant and the Company entered into a consulting agreement dated May 7,
1998. Consultant has provided the consulting and advisory services requested to
date by the Company. Consultant and the Company have agreed that the Company
will make available to Consultant for his use an automobile and driver in
exchange for a reduction in Consultant's cash compensation.
NOW, THEREFORE, intending to be legally bound hereby, the parties agree to
amend Section 4 of the Agreement in its entirety as follows:
4. Compensation. Effective as of October 16, 1999, as compensation and
consideration for such services and responsibilities under this Agreement,
the Company agrees to pay Consultant and Consultant agrees to accept
compensation of $125,000 annually. Such compensation shall be payable in equal,
or as nearly equal as practicable, monthly installments during each month in
which the Consultant provides services hereunder. In addition, the Company
agrees to make available to Consultant for his use an automobile and driver.
The Company shall not be required to provide Consultant with any other payments
or benefits for his services hereunder, provided that the services to be
performed hereunder, and the compensation to be paid therefor, shall be in
addition to Consultant's services and compensation as a member of the Board.
IN WITNESS WHEREOF, the undersigned have executed this Amendment.
AMERICAN WATER WORKS COMPANY, INC.
By:____________________________________
Chairman of the Board of Directors
CONSULTANT:
______________________________________
Anthony P. Terracciano
Dated: October 1, 1999
