Item 1. Business
The "Description of the Business" is set forth on page 23 of the Annual Report to Stockholders for 1997, filed as Exhibit 13 to this Report on Form 10-K; and such description is hereby specifically incorporated herein by reference thereto. The information provided in that section is supplemented by the following details:
The water supplies of the regulated subsidiaries consist of surface supplies, wells, and in a limited number of cases, water purchased under contract. Such supplies are considered adequate to meet present require- ments. In general, all surface supplies are filtered and substantially all of the water is treated with chlorine, and, in some cases, special treatment is provided to correct specific conditions of the water.
In general, the regulated subsidiaries have valid franchises, free from unduly burdensome restrictions, sufficient to enable them to carry on their business as presently conducted. They derive such franchise rights from statutes under which they were incorporated, municipal consents and ordinances, or certificates or permits received from state or local regulatory agencies. In most instances, such franchise rights are non- exclusive.
In most of the states in which the operations of the regulated subsidiaries are carried on, there exists the right of municipal acquisition by one or both of the following methods: (1) condemnation; or (2) the right of purchase given or reserved by the law of the state in which the company was incorporated or received its franchise. The price to be paid upon condemnation is usually determined in accordance with the law of the state governing the taking of land or other property under eminent domain statutes; in other instances, the price is fixed by appraisers selected by the parties, or in accordance with a formula prescribed by the law of the state or in the particular franchise or special charter.
Some of the expenditures for construction by regulated subsidiaries have included facilities to comply with federal and state water quality and safety standards. The nature of some of the construction is described in the section entitled "System Growth and Development," located on pages 24 through 27 of the Annual Report to Stockholders for 1997, filed as Exhibit 13 to this Report on Form 10-K; such information is hereby specifically incorporated herein by reference thereto.
The number of persons employed by the Registrant and subsidiary companies totaled 4,034 at December 31, 1997.
Item 1A.
Item 1A. Executive Officers of the Registrant
The following sets forth the names, ages and business experience during the past five years of the executive officers of the Registrant. No family relationships exist among any of such executive officers, nor do any arrangements or understandings exist between any such executive officer and any other person pursuant to which he was selected as an officer.
Name Age Business Experience During Past Five Years
J. James Barr 56 President and Chief Executive Officer of the Registrant since March, 1998 and Acting President and Chief Executive Officer of the Registrant from November, 1997 to March, 1998. Vice President and Treasurer of the Registrant prior thereto.
Gerald C. Smith 63 Vice President of the Registrant.
W. Timothy Pohl 43 General Counsel and Secretary of the Registrant.
Joseph F. Hartnett, Jr. 46 Treasurer of the Registrant since January, 1998. Vice President and Treasurer of American Water Works Service Company, Inc., service subsidiary of the Registrant, prior thereto.
Robert D. Sievers 44 Comptroller of the Registrant.
The executive officers are elected at the annual organizational meeting of the Board of Directors of the Registrant which is held in May. The executive officers serve at the pleasure of the Board of Directors. Successors to officers who resign, die or are removed during the year are elected by the Board.
Item 2.
Item 2. Properties
The Registrant leases its office space, equipment and furniture from one of its wholly-owned subsidiaries. The office space, equipment and furniture are located in Voorhees, New Jersey and are utilized by the Registrant's directors, officers and staff in the conduct of the Registrant's business.
The regulated subsidiaries own, in the states in which they operate, transmission and distribution mains, pump stations, treatment plants, storage tanks, reservoirs and related facilities. Properties are adequately maintained and units of property are replaced as and when necessary. The Registrant considers the properties of its regulated subsidiaries to be in good operating condition.
A substantial acreage of land is owned by the regulated subsidiaries, the greater part of which is located in watershed areas, with the balance being principally sites of pumping and treatment plants, storage reservoirs, tanks and standpipes.
Item 3.
Item 3. Legal Proceedings
There are no pending material legal proceedings, other than ordinary, routine litigation incidental to the business, to which the Registrant or any of its subsidiaries is a party or of which any of their property is the subject.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5.
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters
The information required under this item is contained in the section entitled "Range of Market Prices," located on page 57 of the Annual Report to Stockholders for 1997, filed as Exhibit 13 to this Report on Form 10-K; such information is hereby specifically incorporated herein by reference thereto.
Item 6.
Item 6. Selected Financial Data
The information required under this item is contained in the section entitled "Consolidated Summary of Selected Financial Data," located on page 22 of the Annual Report to Stockholders for 1997, filed as Exhibit 13 to this Report on Form 10-K; such information is hereby specifically incorporated by reference thereto.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The information required under this item is contained in the section entitled "Management's Discussion and Analysis," located on pages 23 through 34 of the Annual Report to Stockholders for 1997, filed as Exhibit 13 to this Report on Form 10-K; such information is hereby specifically incorporated herein by reference thereto.
Item 8.
Item 8. Financial Statements and Supplementary Data
The financial statements, together with the report thereon of Price Waterhouse LLP dated February 4, 1998, appearing on pages 35 through 53 of the 1997 Annual Report to Stockholders, filed as Exhibit 13 to this Report on Form 10-K, are hereby specifically incorporated herein by reference thereto.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None. PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
The information required under this item with respect to the Directors of the Registrant appears in the fifth full paragraph on page 2 through page 4 and in the section entitled "Section 16(a) Beneficial Ownership Reporting Compliance" on page 8 of the definitive Proxy Statement relating to the Registrant's Annual Meeting of Stockholders on May 7, 1998, to be filed by the Registrant with the Commission pursuant to Section 14(a) of the Securities Exchange Act of 1934 (the "1934 Act"); such information is hereby specifically incorporated herein by reference thereto.
The information required under this item with respect to the Executive Officers of the Registrant is set forth in Item 1A of Part I above pursuant to paragraph (3) of General Instruction G to Form 10-K.
Item 11.
Item 11. Executive Compensation
The information required under this item is contained in the section entitled "Director Remuneration" which is located on page 6, and in the sections entitled "Report of the Compensation and Management Development Committee of the Board of Directors on Executive Compensation," "Performance Graph," "Management Remuneration," and "Pension Plan" which are located on pages 9 through 14 of the definitive Proxy Statement relating to the Registrant's Annual Meeting of Stockholders on May 7, 1998, to be filed by the Registrant with the Commission pursuant to Section 14(a) of the 1934 Act, and is hereby specifically incorporated herein by reference thereto, except for the "Report of the Compensation and Management Development Committee of the Board of Directors on Executive Compensation" and "Performance Graph" which are not so incorporated by reference.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required under this item is contained in the section entitled "Stock Ownership Information" which is located on pages 7 and 8 of the definitive Proxy Statement relating to the Registrant's Annual Meeting of Stockholders on May 7, 1998, to be filed by the Registrant with the Commission pursuant to Section 14(a) of the 1934 Act, and is hereby specifically incorporated herein by reference thereto.
Item 13.
Item 13. Certain Relationships and Related Transactions
There are no material relationships or related transactions other than those disclosed in response to Item 11 of this Part III.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
a) The following documents are filed as part of this report:
1. Financial Statements: the Financial Statements required to be filed by Item 8 are listed in the Index to Financial Statements, which appears on Pages 9 and 10 of this Report on Form 10-K.
2. Financial Statement Schedules: the Financial Statement Schedules required to be filed by Item 8 and by paragraph (d) of this Item are listed in the Index to Financial Statements, which appears on Pages 9 and 10 of this Report on Form 10-K.
3. Exhibits: the Exhibits to this Form 10-K are listed in the Index to Exhibits, which appears on Pages 12 to 14 of this Report on Form 10-K.
b) Reports on Form 8-K.
During the last quarter of the period covered by this Report on Form 10-K, the Registrant filed no reports on Form 8-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By: J. James Barr, President and Chief Executive Officer
DATE: March 5, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
Signature Title Date
Principal Executive Officer:
J. James Barr President and Chief March 5, 1998 Executive Officer
Principal Financial Officer:
J. James Barr President and Chief March 5, 1998 Executive Officer
Principal Accounting Officer:
Robert D. Sievers Comptroller March 5, 1998
SIGNATURES (Cont'd.)
Directors:
William O. Albertini March 5, 1998
J. James Barr March 5, 1998
William R. Cobb March 5, 1998
Elizabeth H. Gemmill March 5, 1998
Henry G. Hager March 5, 1998
Nelson G. Harris March 5, 1998
Marilyn Ware Lewis March 5, 1998
Anthony P. Terracciano March 5, 1998
Paul W. Ware March 5, 1998
Horace Wilkins, Jr. March 5, 1998
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT
YEAR ENDED DECEMBER 31, 1997
AMERICAN WATER WORKS COMPANY, INC.
FINANCIAL STATEMENTS
AMERICAN WATER WORKS COMPANY, INC.
The following documents are filed as part of this report:
Page(s) in (1) FINANCIAL STATEMENTS Annual Report*
Report of Independent Accountants . . . . . . . . . . . . . . 35
Consolidated Balance Sheet of American Water Works Company, Inc. and Subsidiary Companies at December 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . .36 and 37
Consolidated Statement of Income and Retained Earnings of American Water Works Company, Inc. and Subsidiary Companies for each of the three years in the period ended December 31, 1997 . . . . . . . . . 38
Consolidated Statement of Cash Flows of American Water Works Company, Inc. and Subsidiary Companies for each of the three years in the period ended December 31, 1997 . . . . . . . . . . . . . . . . . . . . . . 39
Consolidated Statement of Capitalization of American Water Works Company, Inc. and Subsidiary Companies at December 31, 1997 and 1996 . . . . . . . . . . . . . . .40 and 41
Consolidated Statement of Common Stockholders' Equity of American Water Works Company, Inc. and Subsidiary Companies for each of the three years in the period ended December 31, 1997 . . . . . . . . . . . . . . . . . . . 42
Balance Sheet of American Water Works Company, Inc. at December 31, 1997 and 1996 . . . . . . . . . . . . . . . . 43
Statement of Income and Retained Earnings of American Water Works Company, Inc. for each of the three years in the period ended December 31, 1997 . . . . . . 44
Statement of Cash Flows of American Water Works Company, Inc. for each of the three years in the period ended December 31, 1997. . . . . . . . . . . . . . . . 45
Notes to Financial Statements . . . . . . . . . . . . . .46 through 53
*Incorporated by reference from the indicated pages of the 1997 Annual Report to Stockholders, which is Exhibit 13 to this Report on Form 10-K.
AMERICAN WATER WORKS COMPANY, INC.
INDEX TO FINANCIAL STATEMENTS (Continued)
(2) FINANCIAL STATEMENT SCHEDULES
Financial Statement Schedules not included in this Report on Form 10-K have been omitted because they are not applicable or the required information is shown in the Financial Statements or notes thereto.
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectuses constituting part of the Registration Statement on Form S-3 (No. 33-59059) and in the Registration Statements on Form S-8 (No. 33-62438, No. 33-52923, and No. 333-14451) of American Water Works Company, Inc. of our report dated February 4, 1998 appearing on page 35 of the Annual Report to Stockholders which is incorporated in this Annual Report on Form 10-K.
PRICE WATERHOUSE LLP
Philadelphia, Pennsylvania March 23, 1998
AMERICAN WATER WORKS COMPANY, INC.
INDEX TO EXHIBITS
Exhibit Number Description
3 Articles of Incorporation and By-laws
(a) Certificate of Incorporation of the Registrant, as amended and restated as of May 15, 1987, is incorporated herein by reference to Exhibit 3(a) to Form 10-K report of the Registrant for 1996.
(b) Certificate of Amendment of the Restated Certificate of Incorporation of the Registrant, effective May 9, 1989, is incorporated herein by reference to Exhibit 3(b) to Form 10-K report of the Registrant for 1996.
(c) Certificate of Amendment of the Restated Certificate of Incorporation of the Registrant, effective May 3, 1990, is incorporated herein by reference to Exhibit 3(c) to Form 10-K report of the Registrant for 1996.
(d) Certificate of Designations of the Registrant, effective February 6, 1991, relating to its Cumulative Preferred Stock, 8.50% Series, is incorporated herein by reference to Exhibit 3(d) to Form 10-K report of the Registrant for 1996.
(e) Certificate of Amendment of the Restated Certificate of Incorporation of the Registrant, effective May 2, 1996, is incorporated herein by reference to Exhibit 3(e) to Form 10-K report of the Registrant for 1996.
(f) By-laws of the Registrant, as amended to March 5, 1998, are filed herewith.
4 Instruments Defining the Rights of Security Holders, Including Indentures
(a) Indenture dated as of November 1, 1977 between the Registrant and The Fidelity Bank (name later changed to First Union National Bank), Trustee, is incorporated herein by reference to Exhibit E to Form 10-K report of the Registrant for 1977.
(b) First Supplemental Indenture dated as of December 1, 1989 between the Registrant and Fidelity Bank, National Association (name later changed to First Union National Bank), as Trustee, is incorporated herein by reference to Exhibit 4(i) to Form 10-K report of the Registrant for 1989.
AMERICAN WATER WORKS COMPANY, INC.
INDEX TO EXHIBITS
Exhibit Number Description
4 (cont'd.) (c) Second Supplemental Indenture dated as of February 1, 1993 between the Registrant and Fidelity Bank, National Association (name later changed to First Union National Bank), as Trustee, is incorporated herein by reference to Exhibit 4(c) to Form 10-K report of the Registrant for 1992.
(d) Flip-Over Rights Agreement dated as of March 2, 1989 between the Registrant and Bank of Delaware (name later changed to PNC Bank), as Rights Agent, is incorporated herein by reference to Exhibit 1 to Form 8-A Registration Statement of the Registrant, No. 1-3437-2.
(e) Flip-In Rights Agreement dated as of March 2, 1989 between the Registrant and Bank of Delaware (name later changed to PNC Bank), as Rights Agent, is incorporated herein by reference to Exhibit 1 to Form 8-A Registration Statement of the Registrant, No. 1-3437-2.
10 Material Contracts
(a) Employees' Stock Ownership Plan of the Registrant and Its Designated Subsidiaries, as Amended and Restated Effective January 1, 1989, is incorporated herein by reference to Exhibit 10(a) to Form 10-K report of the Registrant for 1994.
(b) Amendment No. 1 to Employees' Stock Ownership Plan of the Registrant is incorporated herein by reference to Exhibit 10(b) to Form 10-K report of the Registrant for 1995.
(c) Amendment No. 2 to Employees' Stock Ownership Plan of the Registrant is incorporated herein by reference to Exhibit 10(c) to Form 10-K report of the Registrant for 1996.
(d) Supplemental Executive Retirement Plan of the Registrant, as amended and restated July 1, 1997, is filed herewith.
(e) Supplemental Retirement Plan of the Registrant, as amended and restated effective July 1, 1997, is filed herewith.
AMERICAN WATER WORKS COMPANY, INC.
INDEX TO EXHIBITS
Exhibit Number Description
10 (cont'd.) (f) Long-Term Performance-Based Incentive Plan of the Registrant, effective as of January 1, 1993, is incorporated herein by reference to Exhibit 10(f) to Form 10-K report of the Registrant for 1994.
(g) Annual Incentive Plan of the Registrant, effective as of January 1, 1996, is incorporated herein by reference to Exhibit 10(j) to Form 10-K report of the Registrant for 1995.
(h) Amendment No. 1 to the Annual Incentive Plan of the Registrant is filed herewith.
(i) Deferred Compensation Plan of the Registrant, effective as of January 1, 1996, is incorporated herein by reference to Exhibit 10(k) to Form 10-K report of the Registrant for 1995.
(j) Agreement between the Registrant and George W. Johnstone dated December 17, 1997, is filed herewith.
(k) Stay Incentive Award for J. James Barr dated November 6, 1997, is filed herewith.
13 Annual Report to Security Holders
The Registrant's Annual Report to Stockholders for 1997 is filed as exhibit hereto solely to the extent portions thereof are specifically incorporated herein by reference.
21 Subsidiaries of the Registrant
Subsidiaries of the Registrant as of December 31, 1997.
23 Consents of Experts and Counsel
See "Consent of Independent Accountants" on page 11 of this Form 10-K report.
27 Financial Data Schedule
Financial Data Schedule for the fiscal year ended December 31, 1997.