-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, oVXleCaCldhpWMyVxA8DF1PHNGXF9tk/KVwXGnN2IBYLakSERtREg+ZHb48zmAZU UrQ86uQzeQS2wZeruZ7eUQ== 0000318819-95-000005.txt : 199507120000318819-95-000005.hdr.sgml : 19950711 ACCESSION NUMBER: 0000318819-95-000005 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950328 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN WATER WORKS CO INC CENTRAL INDEX KEY: 0000318819 STANDARD INDUSTRIAL CLASSIFICATION: WATER SUPPLY [4941] IRS NUMBER: 510063696 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-03437 FILM NUMBER: 95523778 BUSINESS ADDRESS: STREET 1: 1025 LAUREL OAK RD CITY: VOORHEES STATE: NJ ZIP: 08043 BUSINESS PHONE: 6093468200 MAIL ADDRESS: STREET 1: 1025 LAUREL OAK ROAD CITY: VOORHEES STATE: NJ ZIP: 08043 10-K405 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------- FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ________ to ________ Commission File Number 1-3437-2 AMERICAN WATER WORKS COMPANY, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 51-0063696 - ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. employer identification no.) incorporation or organization) 1025 Laurel Oak Road, Voorhees, New Jersey 08043 - ------------------------------------------ ---------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code 609-346-8200 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered ------------------- ------------------------ Common Stock, $1.25 par value per share New York Stock Exchange Cumulative Preferred Stock, 5% Series, $25 par value per share New York Stock Exchange 5% Cumulative Preference Stock, $25 par value per share New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ]. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock held by non-affiliates of the Registrant at March 6, 1995 was $635,243,961. As of March 6, 1995, there were a total of 32,855,209 shares of Common Stock, $1.25 par value per share, outstanding. DOCUMENTS INCORPORATED BY REFERENCE (1) The following pages and section in Registrant's Annual Report to Stockholders for 1994 are incorporated by reference into Part I, Item 1 and Part II of this Form 10-K: pages 22 through 33, pages 35 through 53, and the section entitled "Range of Market Prices" on page 57. (2) The following pages and section in Registrant's definitive Proxy Statement relating to Registrant's Annual Meeting of Stockholders on May 4, 1995 are incorporated by reference into Part III of this Form 10-K: Page 2 (beginning with the fourth full paragraph thereon) through page 8, with the exception of the second paragraph on page 4, and the section entitled "Director Remuneration" on page 12. 1 of 92 EXHIBIT INDEX ON PAGES 14-16 PART I Item 1. Business The "Description of the Business" is set forth on page 23 of the Annual Report to Stockholders for 1994, 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 operating 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 operating utility 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 operating 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 operating 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 1994, 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 3,992 at December 31, 1994. Item 1A. Executive Officers of the Registrant The following list sets forth the names, ages and offices held with the Registrant by each of the executive officers of the Registrant. No family relationships exist among any of such executive officers, nor do any 2 arrangements or understandings exist between any such executive officer and any other person pursuant to which he was selected as an officer. Name Age Office Held Office Held Since George W. Johnstone 56 President & Chief Executive Officer January 2, 1992 J. James Barr 53 Vice President & Treasurer January 20, 1984 Edward W. Limbach 56 Vice President May 3, 1990 Gerald C. Smith 60 Vice President May 2, 1991 W. Timothy Pohl 40 General Counsel & Secretary January 16, 1988 Robert D. Sievers 41 Comptroller February 14, 1992 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. Prior to his election as President and Chief Executive Officer, Mr. Johnstone was named President-elect in March 1991. In addition, Mr. Johnstone had been a Vice President from May 1987 until January 1992 and an officer of subsidiary companies for more than five years prior to his election as a Vice President. Mr. Barr had been an officer of subsidiary companies for more than five years prior to his election as Treasurer. In addition, Mr. Barr was elected a Vice President on May 6, 1987. Mr. Limbach had been an officer of subsidiary companies for more than five years prior to his election as a Vice President. Mr. Smith had been an officer of subsidiary companies for more than five years prior to his election as a Vice President. Mr. Pohl had been an officer of subsidiary companies from May 1984 to his election as Secretary. In addition, Mr. Pohl was elected General Counsel on May 3, 1990. Prior to being elected to his current position, Mr. Sievers had been Assistant Comptroller since May 1985. 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 subsidiary operating companies 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 operating companies to be in good operating condition. 3 A substantial acreage of land is owned by the operating companies, 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. 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. Submission of Matters to a Vote of Security Holders None. PART II 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 1994, filed as Exhibit 13 to this Report on Form 10-K; such information is hereby specifically incorporated herein by reference thereto. 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 1994, filed as Exhibit 13 to this Report on Form 10-K; such information is hereby specifically incorporated by reference thereto. 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 33 of the Annual Report to Stockholders for 1994, filed as Exhibit 13 to this Report on Form 10-K; such information is hereby specifically incorporated herein by reference thereto. Item 8. Financial Statements and Supplementary Data The financial statements, together with the report thereon of Price Waterhouse LLP dated January 31, 1995, appearing on pages 35 through 53 of the 1994 Annual Report to Stockholders, filed as Exhibit 13 to this Report on Form 10-K, are hereby specifically incorporated herein by reference thereto. 4 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. PART III 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 fourth full paragraph on page 2 through the first full paragraph on page 4 and in the section entitled "Compliance with Section 16(a) of the Securities Exchange Act of 1934, As Amended" which is located on page 6 of the definitive Proxy Statement relating to the Registrant's Annual Meeting of Stockholders on May 4, 1995, 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. Executive Compensation The information required under this item is contained in the sections entitled "Management Remuneration," "Pension Plan," "Report of the Compensation and Management Development Committee of the Board of Directors on Executive Compensation," "Performance Graph" and "Director Remuneration" which are located on pages 7 through 12 of the definitive Proxy Statement relating to the Registrant's Annual Meeting of Stockholders on May 4, 1995, 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. 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 4 through 6 of the definitive Proxy Statement relating to the Registrant's Annual Meeting of Stockholders on May 4, 1995, 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. 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. 5 PART IV 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 14 to 16 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. 6 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: George W. Johnstone, President and Chief Executive Officer DATE: March 2, 1995 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: George W. Johnstone President and March 2, 1995 Chief Executive Officer Principal Financial Officer: J. James Barr Vice President and March 2, 1995 Treasurer Principal Accounting Officer: Robert D. Sievers Comptroller March 2, 1995 7 SIGNATURES (Cont'd.) Directors: William O. Albertini March 2, 1995 William R. Cobb March 23, 1995 Elizabeth H. Gemmill March 2, 1995 Henry G. Hager March 2, 1995 Nelson G. Harris March 2, 1995 George W. Johnstone March 2, 1995 Marilyn W. Lewis March 2, 1995 Nancy W. Wainwright March 2, 1995 Paul W. Ware March 2, 1995 Ross A. Webber March 2, 1995 8 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT YEAR ENDED DECEMBER 31, 1994 AMERICAN WATER WORKS COMPANY, INC. FINANCIAL STATEMENTS 9 AMERICAN WATER WORKS COMPANY, INC. INDEX TO FINANCIAL STATEMENTS 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, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . .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, 1994 . . . . . . . . . 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, 1994 . . . . . . . . . . . . . . . . . . . . . . 39 Consolidated Statement of Capitalization of American Water Works Company, Inc. and Subsidiary Companies at December 31, 1994 and 1993 . . . . . . . . . . . . . . .40 and 41 Consolidated Statement of Common Stockholders' Equity of American Water Works Company, Inc. and Subsidiary Companies for each of the five years in the period ended December 31, 1994 . . . . . . . . . . . . . . . . . . . 42 Balance Sheet of American Water Works Company, Inc. at December 31, 1994 and 1993 . . . . . . . . . . . . . . . . 43 Statements of Income and Retained Earnings of American Water Works Company, Inc. for each of the three years in the period ended December 31, 1994 . . . . . . 44 Statement of Cash Flows of American Water Works Company, Inc. for each of the three years in the period ended December 31, 1994. . . . . . . . . . . . . . . . 45 Notes to Financial Statements . . . . . . . . . . . . . .46 through 53 *Incorporated by reference from the indicated pages of the 1994 Annual Report to Stockholders, which is Exhibit 13 to this Report on Form 10-K. 10 AMERICAN WATER WORKS COMPANY, INC. INDEX TO FINANCIAL STATEMENTS (Continued) (2) FINANCIAL STATEMENT SCHEDULES Description Page* Schedule II: Valuation and Qualifying Accounts Allowance for Uncollectible Accounts. . . . . . . 13 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. *Page number shown refers to the page number in this Report on Form 10-K. 11 Report of Independent Accountants on Financial Statement Schedule To the Board of Directors American Water Works Company, Inc. Our audits of the consolidated financial statements referred to in our report dated January 31, 1995 appearing on page 35 of the 1994 Annual Report to Stockholders of American Water Works Company, Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item 14(a) of this Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. PRICE WATERHOUSE LLP Thirty South Seventeenth Street Philadelphia, Pennsylvania 19103 January 31, 1995 12 Consent of Independent Accountants We hereby consent to the incorporation by reference in the Prospectuses constituting part of the Registration Statements on Form S-3 (Number 33- 32051), on Form S-8 (Number 33-62438), and on Form S-8 (Number 33-52923) of American Water Works Company, Inc. of our report dated January 31, 1995 appearing on page 35 of the Annual Report to Stockholders which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedule, which appears on page 11 of this Form 10-K. PRICE WATERHOUSE LLP Thirty South Seventeenth Street Philadelphia, Pennsylvania 19103 March 24, 1995 13 FINANCIAL STATEMENT SCHEDULE II AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES SCHEDULE II - Valuation and Qualifying Accounts Allowance for Uncollectible Accounts Years Ended December 31 (In thousands) Balance Additions Charged to Balance Beginning ------------------------- End of Year of Year Expense (A) Other (B) Deductions (C) Year - ---- --------- ----------- --------- -------------- ------- 1994 $ 1 107 $ 3 762 $ $ 3 870 $ 999 1993 925 3 377 102 3 297 1 107 1992 871 3 580 3 526 925 (A) Provisions included in operating expense. (B) Allowance for uncollectible accounts of acquired companies. (C) Amounts written off as uncollectible, net of recovery of amounts previously written off. 14 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 1987. (b) Certificate of Amendment of the Certificate of Incorporation of the Registrant, effective May 9, 1989, is incorporated herein by reference to Exhibit 3(a) to Form 10-Q report of the Registrant for June 30, 1989. (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(a) to Form 10-Q report of the Registrant for June 30, 1990. (d) Certificate of Designations of the Registrant 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 1990. (e) By-laws of the Registrant, as amended to January 6, 1994, are incorporated herein by reference to Exhibit 3(e) to Form 10-K report of the Registrant for 1993. 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 Fidelity Bank, National Association), 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 Fidelity Bank, National Association), as Trustee, is incorporated herein by reference to Exhibit 4(i) to Form 10-K report of the Registrant for 1989. 15 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 Fidelity Bank, National Association), 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, 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, 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 filed herewith. (b) Supplemental Executive Retirement Plan of the Registrant, effective as of January 1, 1985, is incorporated herein by reference to Exhibit 19(c) to Form 10-K report of the Registrant for 1985. (c) Amendment No. 1 to Supplemental Executive Retirement Plan of the Registrant is incorporated herein by reference to Exhibit 10(e) to Form 10-K report of the Registrant for 1989. (d) Amendment No. 2 to Supplemental Executive Retirement Plan of the Registrant is incorporated herein by reference to Exhibit 10(g) to Form 10-K report of the Registrant for 1990. (e) Supplemental Retirement Plan of the Registrant, effective as of April 1, 1989, is incorporated herein by reference to Exhibit 10(f) to Form 10-K report of the Registrant for 1989. 16 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 filed herewith. 13 Annual Report to Security Holders The Registrant's Annual Report to Stockholders for 1994 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, 1994. 23 Consents of Experts and Counsel See "Consent of Independent Accountants" on page 12 of this Form 10-K report. 27 Financial Data Schedule Financial Data Schedule for the fiscal year ended December 31, 1994. EX-10 2 17 EXHIBIT 10(a) EMPLOYEES' STOCK OWNERSHIP PLAN OF AMERICAN WATER WORKS COMPANY, INC. AND ITS DESIGNATED SUBSIDIARIES (As Amended and Restated Effective January 1, 1989) 18 TABLE OF CONTENTS Page ARTICLE I. DEFINITIONS.......................................... 1 ARTICLE II. PARTICIPATION........................................ 9 ARTICLE III. CONTRIBUTIONS BY THE COMPANY AND ITS DESIGNATED SUBSIDIARIES......................................... 11 ARTICLE IV. PARTICIPANT CONTRIBUTIONS............................ 11 ARTICLE V. LIMITATION ON MATCHING AND PARTICIPANT CONTRIBUTIONS........................................ 12 ARTICLE VI. PURCHASE OF STOCK.................................... 14 ARTICLE VII. PARTICIPANTS' ACCOUNTS............................... 14 ARTICLE VIII. VESTING.............................................. 17 ARTICLE IX. VOTING OF STOCK...................................... 18 ARTICLE X. AMOUNT AND DISTRIBUTION OF BENEFITS.................. 18 ARTICLE XI. WITHDRAWALS BY PARTICIPANTS; DIVERSIFICATION ELECTION............................................. 20 ARTICLE XII. PLAN ADMINISTRATION.................................. 21 ARTICLE XIII. AMENDMENTS, DISCONTINUANCE AND LIABILITIES........... 23 ARTICLE XIV. MISCELLANEOUS........................................ 24 APPENDIX A TOP-HEAVY PROVISIONS................................. 26 APPENDIX B LIST OF DESIGNATED SUBSIDIARIES...................... 31 19 EMPLOYEES' STOCK OWNERSHIP PLAN OF AMERICAN WATER WORKS COMPANY, INC. AND ITS DESIGNATED SUBSIDIARIES American Water Works Company, Inc. hereby amends and restates, in its entirety, the following Stock Ownership Plan for its employees and the employees of its Designated Subsidiaries. Except as may otherwise be specifically provided herein, any Participant's right to benefits hereunder, and the allocation procedures to be used, with respect to contributions made for any Plan Year beginning before January 1, 1989, shall be governed by the terms of the Plan in effect on January 1, 1987, as amended, or such earlier date as may be applicable in a specific case. The Plan is intended to be an "employee stock ownership plan" as defined in section 4975(e)(7) of the Code. As such, the Plan is designed to invest primarily in qualifying employer securities. ARTICLE I. DEFINITIONS. The following words and phrases as used herein have the following meanings unless a different meaning is plainly required by the context: 1.1 "Account" means a Participant's Account in the Plan, including the following sub-Accounts: (a) "Participant ESOP Account" to hold the amounts allocated to the Participant's Account through December 31, 1986; (b) "Participant Contribution Account" to hold the amounts contributed by the Participant pursuant to Section 4.1 of the Plan; (c) "Company Basic Contribution Account" to hold the Company and Designated Subsidiary basic contributions made pursuant to Section 3.1(a); (d) "Company Matching Contribution Account" to hold the Company and Designated Subsidiary matching contributions made pursuant to Section 3.1(b); and (e) "Qualified Matching Contribution Account" to hold Qualified Matching Contributions, if any, made pursuant to Section 3.1(c). 1.2 "Annual Addition" means the sum credited to the Participant under each Defined Contribution Plan for any Limitation Year, of: (a) Employer contributions, (b) Employee contributions (other than Rollover Contributions), and (c) forfeitures. 1 20 The term "Annual Addition" shall also include the amount allocated to a separate account of the Participant to provide post-retirement medical benefits (a) under a Defined Benefit Plan, as described in section 415(l)(1) of the Code, and (b) with respect to a Participant who is, or was, a Key Employee for any Plan Year, under a welfare benefit fund, as described in section 419A(d)(2) of the Code. 1.3 "Beneficiary" means (a) the Participant's spouse, or (b) the person, persons or trust designated by the Participant, with the consent of the Participant's spouse if the Participant is married, as direct or contingent beneficiary in a manner prescribed by the Committee, or (c) if the Participant has no spouse and has made no effective beneficiary designation, the Participant's heirs under the intestate law of the state of the Participant's domicile at his death. A married Participant may designate a person, persons or trust as beneficiary other than his spouse provided that such spouse consents to such designation in writing in a manner prescribed by the Committee. Such consent shall not be required if the Participant establishes to the satisfaction of the Committee that the consent cannot be obtained because the spouse cannot be located. No subsequent spouse of the Participant shall be bound by any such consent. 1.4 "Board of Directors" means the Board of Directors of American Water Works Company, Inc. 1.5 "Break-in-Service" means a period of 12 consecutive months measured from an Employee's Severance from Service Date, or any anniversary thereof, during which the Employee does not perform an Hour of Service as defined in Section 1.25(a). 1.6 "Code" means the Internal Revenue Code of 1986, as amended. 1.7 "Committee" means the Committee appointed under Article XII as administrator of the Plan. 1.8 "Company" means American Water Works Company, Inc. 1.9 "Compensation." (a) General Rule. Compensation means, except as otherwise provided in this Section 1.9, total annual salaries and other compensation for services as an Employee paid by the Company and its Designated Affiliates and reported to the Employee on Internal Revenue Service Form W- 2, but not including expense allowances or reimbursements or benefits under an long-term disability plan. Notwithstanding the preceding sentence, Compensation shall not include contributions by the Employer to this or any other plan or plans for the benefit of its employees, except as otherwise expressly provided in this Section 1.9. (b) Limitations on Annual Additions. For the purpose of Section 7.3 and Appendix A, Compensation shall include all amounts that are treated as wages for Federal income tax withholding under section 3401(a) 2 21 of the Code (determined without regard to any rules that limit the remuneration included in wages based on the nature or location of the employment or the services performed) and actually paid to the Participant during the Limitation Year, excluding the following: (i) contributions of the Company or a Designated Subsidiary to a plan of deferred compensation that are not includable in the Employee's gross income for the taxable year in which contributed, or employer contributions under a simplified employee pension plan to the extent such contributions are deductible by the Employee, or any distribution from a plan of deferred compensation; (ii) amounts realized from the exercise of a non-qualified stock option, or when restricted stock (or property) held by the Employee either becomes freely transferable or is no longer subject to a substantial risk of forfeiture; (iii) amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; and (iv) other amounts that received special tax benefits, or contributions made by the Company or a Designated Subsidiary (whether or not under a salary reduction agreement) towards the purchase of an annuity described in section 403(b) of the Code, (whether or not the amounts are actually excludable from the gross income of the Employee). (c) Highly Compensated Employee; Key Employee. For the purpose of Section 1.24, defining the term "Highly Compensated Employee," and for the purpose of the definition of "Key Employee" in Appendix A, Compensation shall include the amount determined under Section 1.9(b), plus amounts that would be paid to the Employee during the year but for the Employee's election under a cash or deferred arrangement described in section 401(k) of the Code, a cafeteria plan described in section 125 of the Code, a simplified employee pension described in section 402(h) of the Code or an annuity program described in section 403(b) of the Code. (d) Maximum Annual Dollar Limit. The annual Compensation of each Employee taken into account for any purpose under the Plan, other than those described below in this Section (d), shall not exceed the applicable limit on compensation specified under section 401(a)(17) of the Code (as adjusted thereunder); provided, however, that for purposes of applying this limit, the Compensation of a Highly Compensated Employee shall include the Compensation of a Family Member who is his spouse or his lineal descendant who has not reached age 19 at the close of the Plan Year. This Section (d) shall not apply for purposes of determining which individuals are Key Employees under Appendix A or for purposes of the limitations on Annual Additions to Accounts under section 415 of the Code. 1.10 "Defined Benefit Plan" means any employee pension plan maintained by the Employer that is a qualified plan under section 401(a) of the Code and is not a Defined Contribution Plan. 1.11 "Defined Contribution Plan" means an employee pension plan maintained by the Employer that is a qualified plan under section 401(a) of the Code and is described in section 414(l) of the Code. 3 22 1.12 "Designated Subsidiary" means any Subsidiary named from time to time by the Board of Directors as such under this Plan, or any Subsidiary which, prior to September 15, 1977, was a Designated Subsidiary under the Pension Plan (as defined therein). A Subsidiary's status as a Designated Subsidiary may be changed by the Board of Directors from time to time. Set forth on Appendix B is the list of Designated Subsidiaries. 1.13 "Dividend Reinvestment Plan" means the American Water Works Company, Inc. Dividend Reinvestment Plan, as set forth in prospectus of the Company dated December 8, 1989 filed with the Securities and Exchange Commission, and as such Plan may be amended, interpreted or regulated by the Company from time to time. 1.14 "Effective Date" means January 1, 1976, except as otherwise specified. The effective date of this amendment and restatement is January 1, 1989, except as otherwise specified. 1.15 "Employee" means: (a) an individual who is employed by the Employer; (b) an individual who is not employed by the Employer but is a leased employee within the meaning of section 414(n)(2) of the Code; provided that, if the total number of leased employees constitutes 20% or less of the Employer's nonhighly compensated work force, within the meaning of section 414(n)(5)(C)(ii) of the Code, the term "Employee" shall not include those leased employees covered by a "safe harbor" plan described in section 414(n)(5)(B) of the Code; and (c) when required under Section 1.25 for purposes of crediting Hours of Service, a former Employee. 1.16 "Employer" means the Company and: (a) any other employer included with the Company in a controlled group of corporations or trades or businesses within the meaning of section 414(b) or section (c) of the Code, or an affiliated service group within the meaning of section 414(m) of the Code; and (b) any other entity required to be aggregated with the Company pursuant to regulations under section 414(o) of the Code; provided that any such employer shall be included within the term "Employer" only while a member of such a group including the Company. 1.17 "Employment Commencement Date" means the date upon which an individual was first credited with an Hour of Service, as defined in Section 1.25(a). 4 23 1.18 "Employment Recommencement Date" means the date upon which an individual was first credited with an Hour of Service, as defined in Section 1.25(a) after a Severance from Service Date. 1.19 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. 1.20 "Excess Aggregate Contributions" means that amount of Matching and Participant Contributions made by or on behalf of a Participant for a Plan Year that exceeds the limitation on Matching and Participant Contributions set forth in Article V. 1.21 "Family Member" means an Employee who is a family member (as defined in section 414(q)(6) of the Code) of a Highly Compensated Employee who is: (a) a Five-Percent Owner; or (b) one of the 10 Highly Compensated Employees paid the greatest Compensation during the Plan Year. 1.22 "Five-Percent Owner" means any Employee who owns (or is considered as owning within the meaning of section 318 of the Code) more than 5% of the outstanding stock of any Participating Employer or stock possessing more than 5% of the total combined voting power of all stock of any Participating Employer. For purposes of this Section 1.22, section 318(a)(2)(C) of the Code shall be applied by substituting "5%" for "50%" each time it appears therein. 1.23 "Fund" means the assets and all earnings, appreciation or additions thereto held by the Trustee under the Trust for the exclusive benefit of Participants or their Beneficiaries. 1.24 "Highly Compensated Employee" means any Employee who, during the current Plan Year or immediately preceding Plan Year: (a) is at any time a Five-Percent Owner; (b) receives Compensation from the Employer in excess of $75,000 (as adjusted under section 414(q) of the Code); (c) receives Compensation from the Employer in excess of $50,000 (as adjusted under section 414(q) of the Code) and is in the group consisting of the top 20% of Employees (excluding, solely for purposes of determining the number of Employees in the top 20%, Employees described in section 414(q)(8) of the Code) when ranked on the basis of Compensation paid during such Plan Year; or 5 24 (d) is an officer of the Employer who receives Compensation greater than 50% of the amount in effect under section 415(b)(1)(A) of the Code for such Plan Year; provided that in no event shall the number of individuals treated as officers exceed 50 employees, or, if it would result in a smaller number of officers, the greater of three employees or 10% of the total number of employees. For purposes of determining the number of officers taken into account under Section (d), (i) if more than the maximum number of employees who may be treated as officers are officers, only those officers who had the largest annual Compensation in any one of the five Plan Years ending on the Determination Date shall be treated as officers, and (ii) employees described in section 414(q)(8) of the Code shall be excluded. An Employee who is not described in Sections 1.24(b), 1.24(c), or 1.24(d) for the Plan Year prior to the Plan Year of determination, shall not be treated as being described in Sections 1.24(b), 1.24(c) or 1.24(d) for the Plan Year of determination, unless such Employee is a member of the group consisting of the 100 Employees paid the greatest Compensation during the Plan Year for which such determination is being made. A former Employee (including an Employee who performs no services for the Employer during the Plan Year) shall be treated as a Highly Compensated Employee if he was (or would have been, had this Section 1.24 been applicable) described in this Section 1.24 during the last Plan Year he performed any services for the Employer or in any Plan Year ending on or after the date he reached age 55. In lieu of identifying Highly Compensated Employees in accordance with the preceding provisions, the Employer may identify Highly Compensated Employees in accordance with Section 4 of Revenue Procedure 93-42. 1.25 "Hour of Service" means: (a) each hour for which an Employee is paid, or entitled to payment for the performance of duties for the Employer; (b) each hour for which an Employee is paid or entitled to payment by the Employer with respect to a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military leave or leave of absence, provided that no more than 501 Hours of Service shall be credited to an Employee on account of any single continuous period during which that Employee performs no duties; (c) each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Employer; and (d) if an Employee is absent from employment for any period because of: 6 25 (1) the pregnancy of the individual, (2) the birth of a child of the individual, (3) the placement of a child with the individual in connection with the adoption of such child by the individual, or (4) the provision of care for such child for a period beginning immediately following such birth or placement, each hour that normally would have been credited to such Employee but for such absence; provided that an Employee shall be credited with no more than 501 Hours of Service on account of any single period of absence described in this Section 1.25(d); (e) any other hour required to be credited pursuant to applicable regulations of the Department of Labor. Hours of Service shall be credited to the Employee for the applicable 12 month period or periods in which the duties are performed, for which the payment is made, or to which the award, agreement or leave pertains, except that in the case of hours credited under Section 1.25(d) relating to maternity or paternity leave such hours shall be credited if the year in which the absence from work begins if necessary to avoid a Break-in-Service in that year, or in any other case, in the following year. Hours of Service under this Section 1.25 shall be calculated and credited under the provisions of 29 CFR Section 2530.200b-2 issued by the United States Department of Labor, which regulations are incorporated herein by reference. 1.26 "Limitation Year" means the Plan Year. 1.27 "Non-Highly Compensated Employee" means an Employee who is neither a Highly Compensated Employee nor a Family Member. 1.28 "Normal Retirement Date" means the date a Participant reaches age 65. 1.29 "Participant" means an Employee who has satisfied the eligibility requirements of Article II. 1.30 "Participant Contributions" means a Participant's after-tax contributions that he elects to make pursuant to Section 4.1. 1.31 "Pension Plan" means the Pension Plan for Employees of American Water Works Company, Inc. and its Designated Subsidiaries as amended from time to time. 1.32 "Period of Service" means the period between the later of (a) the Employee's Employment Commencement Date or (b) the Employee's Employment Recommencement Date, and the Employee's Severance from Service Date. 7 26 1.33 "Plan" means the Employee's Stock Ownership Plan of American Water Works Company, Inc. and its Designated Subsidiaries, as set forth in this document and the related trust agreement pursuant to which the Trust is established. 1.34 "Plan Year" means the year ending December 31. 1.35 "Prior Plan" means the version of the Plan in effect on December 31, 1986. 1.36 "Qualified Matching Contribution" means a Matching Contribution made by a Participating Employer pursuant to Section 3.1(c) and allocated to a Participant's Qualified Matching Contribution Account that: (a) is 100% vested and nonforfeitable when made; and (b) may not be distributed earlier than the Participant's separation from service 1.37 "Required Beginning Date" means: (a) except as provided in Section 1.37(b), April 1 of the calendar year following the calendar year in which the Participant reaches age 70-1/2 whether or not he is still an Employee; or (b) with respect to a Participant who reached age 70-1/2 before 1988: (1) who is not a Five-Percent Owner, April 1 of the calendar year following the calendar year in which occurs the later of his retirement or his reaching age 70-1/2; or (2) who is a Five-Percent Owner during any year beginning after 1979, April 1 following the later of (i) the calendar year in which he reaches age 70-1/2, or (ii) the earlier of the calendar year with or within which ends the Plan Year in which he becomes a Five- Percent Owner, or the calendar year in which he retires. 1.38 "Severance from Service Date" means the date upon which an Employee severs his service with the Company or an Affiliated Company, which date shall be the earlier of: (a) the date upon which the Employee quits, is discharged, dies, or retires; or (b) the first anniversary of the first date of such Employee's absence from service for any other reason; provided that an Employee who is absent from service beyond that first anniversary by reason of a maternity or paternity leave resulting from the Employee's pregnancy, the birth of the Employee's child, the placement with the Employee of a child for adoption, or the need to provide care for such a child following its birth 8 27 or adoption, that Employee's Severance From Service Date shall be the second anniversary of the first date of such absence. The period between the first and second anniversaries of the first date of such absence shall be considered neither a Period of Service nor a period of severance. 1.39 "Stock" means voting common stock of the Company of the same class and having the same voting and dividend rights as that common stock of the Company which from time to time is listed for trading on the New York Stock Exchange. 1.40 "Subsidiary" means any corporation which is a member of the affiliated group of corporations of which the Company is the common parent corporation for purposes of section 1504 of the Code. 1.41 "Trust" means the legal entity created by the trust agreement between the Company and the Trustee, fixing the rights and liabilities with respect to controlling and managing the Fund for the purposes of the Plan. 1.42 "Trustee" means The Fidelity Bank, Broad and Walnut Streets, Philadelphia, Pennsylvania 19109 or any corporate trustee or trustees hereafter designated by the Board of Directors and named in the trust agreement or any amendment thereto. 1.43 "Year of Service" means a 12 consecutive month period included within a Period of Service; provided that the following special rules apply: (a) If an Employee quits, is discharged or retires and within 12 months thereafter returns to service and is credited with an Hour of Service, his Years of Service shall be computed as though his service had not been severed. (b) If an Employee who is absent from service for any reason other than those specified in subparagraph (a) above, while so absent, quits, is discharged, is placed on indefinite layoff or retires, within 12 months after the first date upon which he was absent from service, returns to service and is credited with an Hour of Service, his Years of Service shall be computed as though his service had not been severed. (c) An Employee who is absent by reason of service in the armed forces of the United States or on a leave of absence authorized by the Employer and who returns to service with the Employer within the time during which his reemployment rights are protected by federal law or at the expiration of his authorized leave of absence, as applicable, shall be treated as though he had been actively performing services for the Employer during such period of absence. ARTICLE II. PARTICIPATION. 2.1 Eligibility Rule. Except as provided in Section 2.2, an Employee shall be eligible to participate in the Plan beginning on the 9 28 January 1 coincident with or next following his being credited with one Year of Service. 2.2 Ineligible Employees. Each of the following Employees shall be ineligible to participate in the Plan: (a) an Employee who is employed by an Employer that is not the Company or a Designated Subsidiary; (b) an Employee included within a unit of Employees covered by a collective bargaining agreement, unless that collective bargaining agreement provides for their participation in the Plan; (c) a leased employee, within the meaning of section 414(n)(2) of the Code; and (d) an Employee who is a non-resident alien and who has no income from sources within the United States. 2.3 Reemployed Individuals. An Employee who is reemployed after a Break-in-Service shall become a Participant; (a) in accordance with Section 2.1 if that individual was not a Participant prior to the Break-in-Service, or (b) as of his reemployment date if he was a Participant prior to the Break-in-Service. 2.4 Breaks-in-Service for Eligibility. For purposes of determining an individual's eligibility to participate under Section 2.3(a), if an Employee has five or more consecutive Breaks-in-Service, measured from the date he is first credited with an Hour of Service and any anniversary thereof, Years of Service credited before such Breaks-in-Service shall not be counted in determining an Employee's eligibility to participate in the Plan after such Breaks unless the number of his Years of Service before such Breaks-in-Service equals or exceeds the number of his consecutive years of Breaks-in-Service. 2.5 Time of Participation - Excluded Employees. An Employee otherwise eligible to be a Participant in the Plan, but excluded under Section 2.2, shall be eligible to become a Participant beginning on the first day of the month coincident with or next following the date upon which the applicable provision of Section 2.2 ceases to apply. A Participant who becomes subject to any provision of Section 2.2 shall cease to be eligible to make or receive contributions under the Plan as of the last day of the payroll period coincident with, or within which, any such provision becomes applicable. 10 29 ARTICLE III. CONTRIBUTIONS BY THE COMPANY AND ITS DESIGNATED SUBSIDIARIES. 3.1 Amount of Contributions. (a) Basic Contributions. The Company and its Designated Subsidiaries shall contribute to the Fund, for each Plan Year, an amount equal to 0.5% of the Compensation for the immediately preceding Plan Year of each Participant who was an Employee on the preceding December 31. (b) Matching Contributions. The Company and its Designated Subsidiaries shall contribute to the Fund, for each Plan Year, on behalf of each Participant who was an Employee on the preceding December 31, an amount equal to 100% of each Participant's Contributions made pursuant to Section 4.1. (c) Qualified Matching Contributions. If the limitation on Matching and Participant Contributions set forth in Article V is exceeded, at the direction of the Committee, the Company and its Designated Subsidiaries shall make Qualified Matching Contributions to the Qualified Matching Contribution Account of each Participant who is a Non-Highly Compensated Employee in the amount necessary to meet the limitation set forth in such Section. Qualified Matching Contributions shall be treated as Matching Contributions for all purposes of the Plan. (d) Form of Contributions. Contributions under Section 3.1 shall be made in cash, in Stock, or a combination thereof. 3.2 Payment of Company and Designated Subsidiary Contributions. Contributions under Section 3.1 shall be made no earlier than the first day of the Plan Year to which they relate and no later than the due date (including extensions) for the Company's federal income tax return for the Plan Year to which those contributions relate. ARTICLE IV. PARTICIPANT CONTRIBUTIONS. 4.1 Amount of Participant Contributions. Each Participant who was an Employee on the preceding December 31 may elect to contribute to the Plan for each Plan Year an amount that does not exceed 2% of his Compensation for the immediately preceding Plan Year. Such contributions shall be made at such time and in such manner as the Committee, in its discretion, may permit. The Committee shall have the right to vary the time and manner of Participant contributions from year to year, so long as all such changes are applied in a nondiscriminatory manner. 11 30 ARTICLE V. LIMITATION ON MATCHING AND PARTICIPANT CONTRIBUTIONS. 5.1 Limitation - Code Section 401(m). (a) Notwithstanding Section 3.1 (b) and Section 4.1, for each Plan Year commencing after December 31, 1986, Matching and Participant Contributions shall be limited as provided in section 401(m) of the Code, so that the "average contribution percentage," for the eligible Highly Compensated Employees shall bear a relationship to the "average contribution percentage" for the eligible Non-Highly Compensated Employees that meets one of the alternative tests described in section 401(m) of the Code and summarized below, as the Committee shall determine for such Plan Year: (1) the average contribution percentage for the eligible Highly Compensated Employees shall not exceed 125% of the average contribution percentage for the eligible Non-Highly Compensated Employees; or (2) the average contribution percentage for the eligible Highly Compensated Employees shall not exceed the lesser of: (A) 200% of the average contribution percentage for the eligible Non-Highly Compensated Employees, or (B) the average contribution percentage for the eligible Non-Highly Compensated Employees plus two percentage points. (b) The term "average contribution percentage" means the average of each eligible Employee's actual contribution percentage which is equal to the following ratio: (1) the amount of the Matching and Participant Contribution made on behalf of each eligible Employee for the Plan Year, to (2) the Employee's compensation, as defined in section 414(s) of the Code. (c) Family Aggregation. The actual contribution percentage of a Highly Compensated Employee who has any Family Members who are eligible to participate shall be determined by combining the Participant Contributions, Matching Contributions, amounts treated as Matching Contributions and compensation of all eligible Highly Compensated Employees and Family Members. (d) Treatment of Excess Aggregate Contributions. If neither test described in Section 5.1(a) is met, or in the Committee's opinion will be met, the Committee, at its discretion, shall: 12 31 (1) cause the Participating Employer to make Qualified Matching Contributions to the Qualified Matching Contribution Account of each Participant who is a Non-Highly Compensated Employee to the extent necessary to meet one of the tests, provided such Participating Employer authorizes such contribution; or (2) cause Excess Aggregate Contributions, adjusted for income or loss thereon, to be forfeited, if otherwise forfeitable under the terms of the Plan, or if not forfeitable, distributed as additional compensation to Participants on whose behalf the Excess Aggregate Contributions were contributed within two and one-half months after the end of the Plan Year for which they were contributed. (e) Determination of Amount of Excess Aggregate Contributions. The amount of a Highly Compensated Employee's Excess Aggregate Contributions for a Plan Year is the amount necessary to reduce the amount of his Matching and Participant Contributions to a maximum adjusted percentage, which shall be the highest percentage that would cause one of the tests in Section 5.1(a) to be met if each such Highly Compensated Employee who had an actual contribution percentage greater than the maximum adjusted percentage had, instead, such lower percentage. The Matching and Participant Contributions of the Highly Compensated Employees shall be adjusted in order, beginning with the Highly Compensated Employee(s) with the highest actual contribution percentage(s). (f) Determination of Income or Loss. The Committee shall determine the income or loss allocable to Excess Aggregate Contributions by using any reasonable method it selects, provided that the method does not violate section 401(a)(4) of the Code, is used consistently for all Participants and all corrective distributions under the Plan for the Plan Year, and is used by the Plan for allocating income to Participant Accounts. (g) Family Aggregation. In the case of a Highly Compensated Employee whose actual contribution percentage is determined under Section 5.1(c), the determination of the amount of Excess Aggregate Contributions shall be made by reducing his actual contribution percentage as required under Section 5.1(e) and allocating the Excess Aggregate Contributions for the Highly Compensated Employee and his Family Members among each such Employee in proportion to his Matching and Participant Contributions. 5.2 Plan Aggregation; Special Rule. (a) The actual contribution percentage under Section 5.1(b) for an eligible Employee who is a Highly Compensated Employee for the Plan Year and who is eligible to have Matching Contributions or Participant Contributions allocated to his accounts under two or more plans described in section 401(a) or arrangements described in section 401(m) of the Code that are maintained by the Employer, shall be determined as if all such Matching Contributions and Participant Contributions were made under a single arrangement. 13 32 (b) For purposes of satisfying the limitation on Matching and Participant Contributions of Section 5.1, in the event that this Plan satisfies the requirements of section 410(b) of the Code only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of section 410(b) of the Code only if aggregated with this Plan, then actual contribution percentages under Section 5.1.2 of eligible Employees shall be determined as if all such plans were a single plan. (c) The determination and treatment of the actual contribution percentage of any Participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury. ARTICLE VI. PURCHASE OF STOCK. 6.1 The Trustee shall invest and reinvest all contributions to the Fund in Stock in accordance with this Article VI and the terms of the Trust Agreement. 6.2 (a) All contributions to the Fund shall be used by the Trustee to purchase whole shares of Stock, at the time specified by Section 6.3, from the Company, on the open market, or in a private transaction from a shareholder of the Company who is neither a "disqualified person" within the meaning of section 4975 of the Code nor a "party in interest" within the meaning of section 3(14) of ERISA. (b) If Stock is to be purchased from the Company, the price shall be the average of the closing prices of such Stock on the New York Stock Exchange during the 20 consecutive trading days preceding the date of purchase, and no commission shall be paid on any purchase. 6.3 Purchases of Stock with contributions made pursuant to Section 3.1 and Section 4.1 shall be made by the Trustee on or before the 30th day following the receipt of such contributions. 6.4 Notwithstanding any other provision of the Plan, the Trustee may at all times maintain a balance of cash in an amount not in excess of the amount which it reasonably anticipates will be necessary to make cash distributions to Participants in lieu of shares or fractional shares over the next 12 months. The Company may advance to the Trustee, in any Plan Year, the amount which the Company anticipates will be necessary for the purposes of this Section 6.4. All advances made under this Section 6.4 shall be credited against the contribution required under Section 3.1 for the Plan Year during which the advance is made. ARTICLE VII. PARTICIPANTS' ACCOUNTS. 7.1 (a) The Committee, based upon information supplied by the Trustee, shall maintain a separate Account for each Participant. (b) The records of the Accounts required under subsection 7.1(a) shall be maintained on a Plan Year basis and shall separately 14 33 reflect (1) the total number of shares of Stock allocated to each Account for each Plan Year which are attributable to contributions under Section 3.1(a), Section 3.1(b) and Section 3.1(c), (2) the total number of shares of Stock allocated to each Account for each Plan Year which are attributable to contributions under Section 4.1, (3) the total number of shares of Stock allocated to each Account for each Plan Year which are attributable to contributions made under Section 4.2 of the Prior Plan, (4) the total number of shares of Stock allocated to each Account for each Plan Year which are attributable to contributions made under Section 4.3 of the Prior Plan, (5) any cash or other property allocated to such Account, and (6) the Trustee's basis in each share of stock held as part of each Account. 7.2 Allocations to Participants' Accounts. (a) As of each December 31, the Account of each individual who is a Participant on that date and who, on the date on which the contribution allocable as of that December 31, determined under Section 7.4, is actually made, is either an Employee or has a vested interest in his Account shall be credited with his allocable share of (1) any Stock which is allocable to the Plan Year ending on that December 31, (2) any contributions allocable to the Plan Year ending on that December 31 but not yet applied to the purchase of Stock and (3) any earnings of the Fund allocable to the Plan Year ending on that December 31. (b) Earnings. A Participant's allocable share of any earnings of the Fund allocable to a particular Plan Year shall be that portion which bears the same ratio to the total of all such earnings as the number of shares of Stock allocated to such Participant's Account as of the December 31 immediately preceding that Plan Year bears to the number of shares of Stock allocated to all Participants' Accounts as of that date. For the purposes of this Section 7.2(b), the term "earnings of the Fund" shall include (l) Stock received as a distribution with respect to Stock held in the Fund, and (2) other property, not including cash, or the proceeds of the sale of such other property, received as a distribution with respect to Stock held in the Fund. (c) Fractional Shares of Stock. Subject to Section 7.3, all shares of Stock purchased by the Trustee shall be allocated to Participants' Accounts even though the result may be the allocation of fractional shares, computed to at least the nearest two decimal places. 7.3 (a) In the event that the Annual Additions to any Participant's Account under Section 7.2 for any Plan Year shall exceed the subsection (b) hereof, the excess shall be reallocated to the Accounts of all other Participants in accordance with Section 7.2. If, after applying this section to all Participants' Accounts, there remains an amount which may not be allocated to any Participant's Account without violating the limits of subsection (b) hereof, such amount shall be held in an unallocated account by the Trustee and allocated, in subsequent Plan Years in accordance with subsection 7.2(a) and this Section. No fund assets may be 15 34 held in any such unallocated account except to the extent failure to hold such assets unallocated would violate this Section. (b) The maximum Annual Addition to any Participant's Account under this Section 7.3 for any Limitation Year shall be the lesser of: (1) $30,000 (or, if greater, one-fourth of the defined benefit dollar limitation set forth in section 415(b)(1)(A) of the Code); or (2) 25% of the Participant's Compensation, as defined in Section 1.9(b) for such Limitation Year. (c) If a Participant in the Plan is also a participant in a Defined Benefit Plan, the sum of the defined benefit plan fraction and the defined contribution fraction shall not exceed 1.0. In calculating the defined contribution fraction, the Committee may, in its discretion, make the election provided under section 415(e) (6) of the Code. (1) The defined benefit plan fraction for any Limitation Year is a fraction (A) the numerator of which is the Participant's projected annual benefit under all such Defined Benefit Plans (determined as of the close of the Limitation Year), and (B) the denominator of which is the lesser of (i) $90,000 or the applicable dollar limit for such Limitation Year multiplied by 1.25 (1.0 if the Plan is a Super Top-Heavy Plan within the meaning of A.10 of the Appendix), or (ii) the Participant's average Compensation for the three consecutive calendar years of active participation that produce the highest average, multiplied by 1.4. (2) The defined contribution plan fraction for any Limitation Year is a fraction (A) the numerator of which is the total of the Participant's Annual Additions for the Limitation Year and all prior Limitation Years under all Defined Contribution Plans, and (B) the denominator of which is the lesser of the following amounts determined for the Limitation Year and for each prior Limitation Year during which the Participant was an Employee (regardless of whether any defined contribution plan was in existence during those years): (A) 1.25 (1.0 if the Plan is a Super Top-Heavy Plan within the meaning of Section A.10 of the Appendix) multiplied by $30,000, or the applicable limit for each such Limitation Year, or (B) 35% of the Participant's Compensation, as defined in Section 1.9(b), for each such Limitation Year. 7.4 Contributions allocated under Sections 7.2 and 7.3 above shall be deemed to have been made on the December 31 immediately preceding the date on which they were made. Contributions and Stock purchased with those 16 35 contributions will be considered allocable to a particular Plan Year if they are taken into account in computing the federal income tax deduction to which the Company and its Designated Subsidiaries are entitled for that Plan Year, although such contributions may be made, or such Stock may be purchased, following the end of such Plan Year. 7.5 For the purposes of subsections 7.2(a) and 7.2(b), a former Participant whose service was terminated at any time during a Plan Year by reason of retirement or death or whose service was terminated because of a reorganization, relocation, merger or similar transaction involving the Company or any of its Designated Subsidiaries shall be considered to be a Participant on the last day of that Plan Year. 7.6 Disposition of Forfeitures. Any amounts released from a Participant's Basic, Matching and Qualified Matching Accounts upon a termination of employment before the Participant has been credited with a 100% vested interest in those Accounts shall be placed in a suspense account and held for five complete calendar years, at which time the amounts shall be forfeited. During that five year period, dividends paid on Stock held in the suspense account shall be accumulated in that account. If the Participant again becomes an Employee before he incurs five consecutive Breaks-in-Service, the amounts held in the suspense account shall be restored to him. After the Participant has incurred five consecutive Breaks-in-Service amounts held in the suspense account shall be released and used to reduce Basic and then Matching Contributions of the Company or Designated Subsidiary employing such Participant of the time of his termination of employment for the Plan Year in which such amounts are released from the suspense account or any succeeding Plan Year. ARTICLE VIII. VESTING. 8.1 Rate of Vesting in ESOP, Participant Contribution and Qualified Matching Accounts. A Participant shall have a 100% vested interest, at all times, in all shares of Stock or other assets standing to the credit of his ESOP Account, his Participant Contribution Account and his Qualified Matching Contribution Account. 8.2 Rate of Vesting in Basic and Matching Accounts. A Participant shall have no vested interest in his Basic and Matching Accounts until he has been credited with five Years of Service at which time he shall have a 100% vested interest in all shares of Stock or other assets standing to the credit of those Accounts. In any event, a Participant shall be 100% vested in his Basic and Matching Accounts on (i) his Normal Retirement Date if he is employed by the employer on that date, or (ii) upon his death while employed by the Employer. 8.3 Breaks-in-Service for Vesting. If a former Participant is re- employed by the Company or a Designated Subsidiary, all of his Years of Service shall be recognized for purposes of vesting in his Basic and Matching Accounts unless, at the time of his return to employment, the period of his absence was at least five consecutive Breaks-in-Service in 17 36 which event Years of Service occurring before those Breaks-in-Service shall not thereafter be recognized for any purpose of the Plan unless, before those Breaks-in-Service, the Participant had become vested in his Account under the Plan. ARTICLE IX. VOTING OF STOCK. 9.1 The Trustee shall vote all shares of Stock, including fractional shares, allocated to a Participant's Account, in the manner directed by the Participant to whose Account such shares are allocated. 9.2 The Committee shall establish and maintain a procedure by which Participants will be timely notified of their right to direct the voting of Stock allocated to their Accounts and the manner in which any such directions are to be conveyed to the Trustee. 9.3 If a Participant fails to direct the voting of shares of Stock allocated to his Account, the Trustee shall abstain from voting any such shares of Stock. If shares of Stock are being held unallocated pursuant to Section 7.3 or Section 7.6, the Trustee may vote, or abstain from voting, any such shares of Stock as the Trustee, in its sole discretion, shall determine. ARTICLE X. AMOUNT AND DISTRIBUTION OF BENEFITS. 10.1 At the election of the Participant on a form provided by the Committee (until such election is amendment or revoked) any cash dividends received by the Trustee shall be: (a) distributed to such Participant as soon as practical after those amounts are received by the Trustee, less any taxes required to be withheld under federal or state laws; or (b) reinvested by the Trustee in Stock pursuant to the Dividend Reinvestment Plan. If no election is made by the Participant pursuant to this Section 10.1, dividends will be distributed in accordance with Section 10.1(a). The amount to be distributed or reinvested shall be that portion of the total cash dividend which bears the same ratio to that total dividend as the number of shares of Stock allocated to the Participant's Account as of the preceding December 31 bears to the number of shares of Stock allocated to all Participants' Accounts as of that date. Shares of Stock acquired through the Dividend Reinvestment Plan pursuant to a Participant's election under this Section 10.1 shall no be considered assets of this Plan, but rather shall be governed by the terms of the Dividend Reinvestment Plan. 10.2 Upon termination of his service for reasons other than his death, a Participant shall be entitled to receive the balance of his Account as of the December 31 coincident with or immediately preceding his termination of service plus any amounts subsequently allocated to his 18 37 Account under Section 7.2. Any distribution pursuant to this Section 10.2 shall be made at such time as the Committee shall direct, but, except as may otherwise be legally required, shall begin not later than 90 days following the close of the Plan Year in which the last allocation to the Participant's Account is contributed. Provided a written election form is submitted at least 60 days in advance, a Participant may elect to have his Account distributed beginning not later than 60 days following the close of the Plan Year in which he reaches age 65. For the purpose of this Section 10.2 a Participant's service shall not be deemed to have terminated by reason of his transfer to an employment status with the Company or a Designated Subsidiary which is not covered by this Plan. Notwithstanding the foregoing, the entire value of a Participant's Accounts must be distributed beginning no later than the Participant's Required Beginning Date. 10.3 Upon termination of a Participant's service by reason of his death, the balance of his Account as of the December 31 coincident with or immediately preceding the Participant's date of death, plus any amounts subsequently allocated to his Account under Section 7.2, shall be distributed to the Participant's Beneficiary, beginning within 90 days following the end of the Plan Year in which occurs the last allocation to the Participant's Account is contributed. 10.4 If a Participant dies following his termination of service, but before any distribution is made pursuant to Section 10.2, the balance of his Account, as of the December 31 coincident with or immediately preceding his termination of service plus any amounts subsequently allocated to his Account under Section 7.2, shall be distributed to the Participant's Beneficiary, beginning within 90 days following the end of the Plan Year in which the last allocation to the Participant's Account is contributed. To the extent practicable, the Committee shall insure that any distribution pursuant to this Section 10.4 is completed within the recipient's taxable year in which it begins. 10.5 A Participant, or in the case of a distribution under Section 10.3 or 10.4 as to which the Participant has made no election, a Participant's Beneficiary, may elect to receive distribution pursuant to this Article IX in cash or in Stock. If the Participant or beneficiary elects distribution in cash, the Trustee shall convert all shares of Stock allocated to the Participant's Account, including fractional shares, to cash, at the price at which such Stock is traded on the New York Stock Exchange on the conversion date and shall distribute the proceeds to the Participant or Beneficiary. 10.6 Before a distribution of a Participant's Account pursuant to this Article X is made to a Participant or Beneficiary who has elected to receive the distribution in Stock, any cash, or assets other than Stock, allocated to such Account shall be applied to the purchase of Stock, either in the manner and at the price specified in Section 6.2 or from an unallocated account established pursuant to Section 7.3 at the price at which such Stock could currently be purchased on the New York Stock 19 38 Exchange, so that all distributions will be made in shares of Stock, except that cash shall be distributed in lieu of fractional shares of Stock. For the purpose of this Article X, a fractional share of Stock allocated to a Participant's Account shall be valued at its pro rata share of the closing price of a whole share of Stock on the New York Stock Exchange on the deemed distribution date preceding the date upon which the Participant's Account is to be distributed. 10.7 Any shares of Stock distributed pursuant to the terms of this Plan shall be subject to such restrictions on their transfer as shall be necessary or appropriate, in the opinion of counsel for the Company and the Trust, to comply with applicable federal and state securities laws. 10.8 No distribution of all or any part of any Participant's Account under this Plan shall be made except in accordance with this Article X, or the withdrawal provisions of Article XI. 10.9 Direct Rollovers. This Section 10.9 will apply to distributions from a Participant's Account made after December 31, 1992. If one or more distributions from a Participant's Account constitutes an "eligible rollover distribution," within the meaning of sections 402(c)(2) and (4) of the Code and regulations thereunder, the Participant may elect to have all or a portion (but not less than $500) of the distribution paid directly to an individual retirement account or annuity (an "IRA") or a plan qualified under Code Section 401(a) or 403(a) (collectively, an "eligible retirement plan"). The Participant may not elect to have portions of an eligible rollover distribution paid directly to more than one eligible retirement plan. In addition, the Participant will not be permitted to elect a direct rollover with respect to eligible rollover distributions that are reasonably expected to total less than $200 during the year. The Committee shall make such payment upon receipt from the Participant of the name of the eligible retirement plan to which such payment is to be made, a representation that the eligible retirement plan is an IRA or a plan qualified under section 401(a) or 403(a) of the Code, and such other information and/or documentation as the Committee may reasonably require to make such payment. If the Participant fails to elect whether or not a distribution is to be paid in a direct rollover, the Participant will be deemed to have elected not to have any portion of the distribution paid in a direct rollover. This Section shall apply, to the extent required by law, to a Beneficiary who is the Participant's surviving spouse and to a spouse or former spouse who is an alternate payee under a qualified domestic relations order as defined in section 414(p) of the Code, except that only an IRA will be deemed to be an eligible retirement plan with respect to a surviving spouse or a deceased Participant. ARTICLE XI. WITHDRAWALS BY PARTICIPANTS; DIVERSIFICATION ELECTION. 11.1 A Participant may, by written election, in the form prescribed by the Committee and filed with the Committee at least 30 days prior to the end of a Plan Year, elect to receive, during the first 90 days of the succeeding Plan Year, a distribution of any shares of Stock (except Stock 20 39 attributable to Qualified Matching Contributions) which have been allocated to the Participant's Account for at least 84 months preceding the last day of the Plan Year immediately preceding the Plan Year in which the distribution is to be made. Withdrawals shall be made by Plan Year beginning with the earliest eligible Plan Year. Each withdrawal must include all shares credited to the Participant's Account for each Plan Year to which the withdrawal election applies. Cash shall be paid in lieu of fractional shares. 11.2 Diversification Election. Notwithstanding Section 11.1, if an "eligible Participant" makes a diversification election, in writing in a form prescribed by the Committee, an amount equal to 25% (50% in the case of the last Plan Year during which the Participant is an eligible Participant) of the value of the Participant's Accounts attributable to Stock acquired after December 31, 1986, reduced by the amount distributed pursuant to any previous election, shall be distributed to the Participant within 90 days after the close of the "election period". For purposes of this Section 11.2, a Participant is an "eligible Participant" during each of the five Plan Years following the first Plan Year in which the Participant has both attained age 55 and completed 10 years of participation, including participation before the effective date of this amendment and restatement. The "election period" is the 90-day period immediately following the close of each Plan Year during which the Participant is an eligible Participant. ARTICLE XII. PLAN ADMINISTRATION. 12.1 The Plan shall be administered by the Committee, which shall be deemed to be the Plan's "named fiduciary" and "administrator", as those terms are defined by the Employee Retirement Income Security Act of 1974, as amended. All matters relating to the administration of the Plan, including the duties imposed upon the Plan administrator by law, except those duties relating to the control or management of Plan assets, shall be the responsibility of the Committee. All matters relating to the control or management of Plan assets shall, except to the extent delegated in accordance with the trust agreement, be the sole exclusive responsibility of the Trustee. 12.2 The Committee shall consist of not less than three persons who shall be appointed and may be removed by the Board of Directors. Persons appointed to the Committee may be, but need not be, employees of the Company or a Designated Subsidiary. Any Committee member may resign by giving written notice to the Board of Directors, which notice shall be effective 30 days after delivery. A Committee member may be removed by the Board of Directors by written notice to such Committee member, which notice shall be effective upon delivery. The Board of Directors shall promptly select a successor following the resignation or removal of any Committee member. 12.3 Members of the Committee who are employees of the Company shall serve without compensation. Members of the Committee who are not employees 21 40 of the Company or a Designated Subsidiary may be paid reasonable compensation for services rendered to the Plan. Such compensation, if any, and all ordinary and necessary expenses of the Committee shall be paid by the Company. 12.4 The Committee may enact such rules and regulations for the conduct of its business and for the administration of the Plan as it may deem desirable. The Committee may act either at meetings at which a majority of its members are present or by a writing signed by a majority of its members without the holding of a meeting. Records shall be kept of the meetings and actions of the Committee. No member of the Committee who is a Participant in the Plan shall vote upon any matter affecting only his Account. 12.5 The Committee shall have the authority and responsibility to interpret and construe the Plan and to decide all questions arising thereunder, including without limitation, questions of eligibility for participation, eligibility for benefits, Account balance, and the timing of the distribution thereof, and shall have the authority to deviate from the literal terms of the Plan to the extent the Committee shall determine to be necessary or appropriate to operate the Plan in compliance with the provisions of applicable law. 12.6 The Committee shall administer and interpret the Plan for the exclusive benefit of Participants and their Beneficiaries. 12.7 The Committee may, and to the extent required for the preparation of reports shall, employ such accountants, actuaries, attorneys, consultants and other advisors or agents, as necessary. The fees charged by such accountants, actuaries, attorneys, consultants or other advisors and agents shall be paid by the Company. 12.8 The Committee may delegate any of its responsibilities to any officer of the Company, and may allocate any of its responsibilities to one or more members of the Committee. In the event of any such delegation or allocation the Committee shall establish procedures for the thorough and frequent review of the performance of such duties. Persons to whom responsibilities have been delegated may not delegate to others any discretionary authority or discretionary control with respect to the management or administration of the Plan. 12.9 The Committee shall administer a claims procedure as follows: (a) If a claim for benefits is denied by the Committee either in whole or in part, the Committee shall notify any Participant or Beneficiary adversely affected by such denial by a written notice setting forth the specific reason or reasons for the denial, a specific reference to the provisions of the Plan upon which the denial is based, a description of any additional material or information necessary for the Participant or Beneficiary to obtain a review of the decision denying the claim in whole or in part together with an explanation of the reasons such material or 22 41 information may be necessary for these purposes, and an explanation of the claim review procedures for the Plan. (b) The Participant or Beneficiary whose claim has been denied in whole or in part (or the authorized representative of the Participant or Beneficiary) may, within 60 days after receipt of the written notification described in (a) above, appeal the denial of the claim by delivering to a member of the Committee a written request for a review of the denial. Such written request for a review may be supplemented, within 30 days following delivery of the request for a review, by written comments prepared by the claimant or his duly authorized representative, and the claimant or his duly authorized representative shall for purposes of preparing the request for a review or the additional written comments have made available to him any pertinent documents. (c) Within 60 days following the later of receipt of a request for review by a member of the Committee or receipt of any additional written comments, the Committee shall give notice to the claimant of its decision on review, which decision shall include specific reasons for the decision and specific references to the provisions of the Plan upon which the decision on review is based. ARTICLE XIII. AMENDMENTS, DISCONTINUANCE AND LIABILITIES. 13.1 This Plan may be amended at any time and from time to time by the Board of Directors, provided that no amendment shall divest any interest of any Participant or Beneficiary, nor be effective unless the Plan continues to be for the exclusive benefit of the Participants and their beneficiaries. 13.2 The Company reserves the right to discontinue the Plan at any time by action of the Board of Directors. If the Plan is so discontinued the Fund shall continue to be held for distribution as provided in Article X and Article XI. No new Participants may thereafter be admitted to the Plan and the Company shall make no further contributions to the Fund. 13.3 The Company reserves the right, by action of the Board of Directors, to merge or consolidate this Plan with any other employee stock ownership plan qualified under section 401(a) of the Code, or to transfer Plan assets and liabilities to any other such plan qualified under section 401(a) of the Code, including such a transfer in connection with the termination of a Subsidiary's status as a Designated Subsidiary, provided that the amount standing to the credit of each Participant's Account immediately after any such merger, consolidation or transfer of assets and liabilities shall be at least equal to the amount standing to the credit of the Participant's Account immediately before such merger, consolidation or transfer. 13.4 In the event a Subsidiary ceases to be a Designated Subsidiary, but continues in existence as a corporate entity, no further allocations shall be made to the Accounts of the Participants employed by that 23 42 Subsidiary, other than Stock, money or other property distributed with respect to Stock held in those Accounts, for any Plan Year beginning after the Subsidiary ceases to be a Designated Subsidiary. Those Participants' Accounts shall either be: (a) transferred-to another qualified plan, in accordance with Section 13.3, or (b) completely distributed to the Participants entitled thereto in accordance with the provisions of Article X. ARTICLE XIV. MISCELLANEOUS. 14.1 The establishment or existence of the Plan shall not confer upon any Employee the right to be continued in the employ of the Company or any Designated Subsidiary. The Company and its Designated Subsidiaries expressly reserve the right to discharge any Employee whenever in their judgment their best interests so require. 14.2 No benefit payable under the Plan shall be subject in any manner to anticipation, assignment, or voluntary or involuntary alienation. This section shall not preclude the Trustee from complying with the terms of any qualified domestic relations order under section 414(p) of the Code. 14.3 If the Committee, in its sole discretion, deems a Participant or Beneficiary who is entitled to receive any payment hereunder to be incompetent to receive the same by reason of age, illness or any infirmity or incapacity of any kind, the Committee may direct the Trustee to apply such payment directly for the benefit of such person, or to make payment to any person selected by the Committee to disburse the same for the benefit of the Participant or Beneficiary. The receipt given by such a person shall be complete discharge therefor. Payments made pursuant to this section shall operate as a discharge, to the extent thereof, of all liabilities of the Company, any Designated Subsidiary, the Committee, the Trustee, and the Fund to the person for which benefit the payments are made. 14.4 Impossibility of Diversion. All Plan assets shall be held, in trust, as part of the Fund, until paid to provide benefits to Participants or their Beneficiaries or to pay reasonable Plan expenses. It shall be impossible for any part of the Fund to be used for, or diverted to, purposes other than the exclusive benefit of the Participants or their beneficiaries, and the Trust shall continue for such time as may be necessary to accomplish the purpose for which it is created. 14.5 Provisions Relating to Top-Heavy Plan. Notwithstanding anything in the Plan to the contrary, if the Plan is determined to be a Top-Heavy Plan within the meaning of Section A.12 of Appendix A and Code section 416(g) for any Plan Year, then Article B of Appendix A shall apply. 24 43 14.6 The effectiveness of this amendment and restatement, including but not limited to the contributions made by the Company and its Designated Subsidiaries, shall be subject to and contingent upon a determination of the District Director of Internal Revenue that the Plan and Trust continue to meet the requirements for qualification under the applicable provisions of the Code. If the amendment and restatement should be determined by the District Director not to continue to meet the requirements for qualification, then, upon notice to the Trustee, the Company shall have the right further to amend the Plan or to rescind the amendment and restatement. To record the adoption of the amendment and restatement of the Plan, the Company and its Designated Subsidiaries have caused this document to be executed, on their behalf, by the appropriate officers of the Company on this 22nd day of December, 1994. AMERICAN WATER WORKS COMPANY, INC. AND ITS DESIGNATED SUBSIDIARIES ATTEST: W. Timothy Pohl By: George W. Johnstone 25 44 APPENDIX A TOP-HEAVY PROVISIONS ARTICLE A. TOP-HEAVY PLAN DEFINITIONS. The following words and phrases as used herein have the following meanings unless a different meaning is plainly required by the context: A.l "Account Balance" means, for all plans included in an Aggregation Group, the sum of: A.1.1 the balance, as of the Top-Heavy Valuation Date, standing to the credit of a Participant (including a Beneficiary of such Participant) in his Account, including contributions that would be allocated as of the Top-Heavy Valuation Date, even though these amounts are not yet required to be contributed, except for amounts maintained in a subaccount attributable to "unrelated" rollover contributions or plan-to- plan transfers; and A.1.2 the aggregate distributions made with respect to such Participant (including a Beneficiary of such Participant) under the Plan during the five-year period ending on the Determination Date. The term "Account Balance" shall not include any amount held or distributed on behalf of any Participant who is a Former Key Employee, or who has not received compensation from the Employer (other than benefits under qualified plans maintained by the Employer) at any time during the five- year period ending on the Determination Date. A.2 "Aggregation Group" means: A.2.1 a Required Aggregation Group, or A.2.2 a Permissive Aggregation Group. A.3 "Determination Date" means: A.3.1 if the Plan is not included in an Aggregation Group, the last day of the preceding Plan Year; or A.3.2 if the Plan is included in an Aggregation Group, the Determination Date as determined under Section A.3.1 that falls within the same calendar year as does the determination date of each other plan included in such Aggregation Group. A.4 "Employer" means the Company and any Designated Subsidiary. A.5 "Former Key Employee" means a Participant who is a Non-Key Employee with respect to the Plan for the Plan Year if such Participant was a Key Employee with respect to the Plan for any prior Plan Year. 26 45 A.6 "Key Employee" means an Employee, including a deceased former Employee, with respect to the Plan Year, who at any time during the Plan Year that includes the Determination Date or any of the four preceding Plan Years is (or was): A.6.1 An officer of the Employer having annual compensation greater than 150% of the amount in effect under Code section 415(b)(1)(A) for the calendar year in which such Plan Year ends, provided that in no event shall he number of individuals treated as officers exceed 50 employees, or, if lesser, the greater of three employees or 10% of the total number of employees: If more than the maximum number of employees who may be treated as officers are officers, only those officers who had the largest annual compensation in any one of the five Plan Years ending on the Determination Date shall be treated as officers. A.6.2 One of the 10 Employees having annual Compensation from the Employer of more than the maximum dollar limitation of Code section 415(c)(1)(A) and owning (or considered as owning within the meaning of Code section 318) the largest interest in the Employer, provided that such interest is more than 0.5% of the ownership interest in the Employer. If an Employee's ownership interest change, during a Plan Year, his ownership interest for the year is the largest interest owned at any time during the year. If two Employees have the same ownership interest in the Employer during the five Plan Years ending on the Determination Date, the Employee having the larger annual compensation from the Employer for the Plan Year during any part of which that ownership interest existed shall be treated as having a larger interest; A.6.3 If the Employer is a corporation, an Employee who owns (or is considered as owning within the meaning of Code section 318) more than 5% of the outstanding stock of the Employer or more than 5% of the total combined voting power of all stock of the Employer; if the Employer is not a corporation, an Employee who owns more than 5% of the capital or profits interest in the Employer; or A.6.4 A person who has annual compensation from the Employer of more than $150,000 and who would be described in Section A.3.3 if "1%" were substituted for "5%" each time it appears in Section A.6.3. For purposes of this Section A.6, Code section 318(a)(2)(C) shall be applied by substituting "5%"' for "50%". In addition, for purposes of determining ownership in the Employer under this Section A.3, Section A.4 shall not apply. A.7 "Non-Key Employee" means any Employee, including a deceased former Employee who is not a Key Employee with respect to the Plan for the Plan Year. A.8 "Permissive Aggregation Group" means: 27 46 A.8.1 each plan of the Employer included in a Required Aggregation Group; and A.8.2 each other plan of the Employer if the group of plans consisting of such plan and the plan or plans described in Section A.8.1, when considered as a single plan, meets the requirements of Code section 401(a)(4) and Code section 410. A.9 "Required Aggregation Group" means: A.9.1 each plan of the Employer in which a Key Employee participated during the five Plan Years ending on the Determination Date; and A.9.2 each other plan of the Employer that enables any plan described in Section A.9.1 to meet the requirements of Code section 401(a)(4) or Code section 410. A.10 "Super Top-Heavy Plan" means the Plan if it would be a Top-Heavy Plan if "90%" were substituted for "60%" each time it appears in Section A.11 and Section A.12. A.11 "Top-Heavy Group" means an Aggregation Group in which, as of the Determination Date, the sum of: A.11.1 the aggregate of the Account Balances of Key Employees under all Defined Contribution Plans included in an Aggregation Group, and A.11.2 the aggregate of the present value of cumulative accrued benefits for Key Employees under all Defined Benefit Plans included in an Aggregation Group, exceeds 60% of the sum of such aggregate determined for all Employees. A.12 "Top-Heavy Plan" means the Plan, if as of the Determination Date: A.12.1 the aggregate of the Account Balances of Participants who are Key Employees exceeds 60% of the aggregate of the Account Balances of all Participants; or A.12.2 the Plan is part of a Required Aggregation Group which is a Top-Heavy Group. Notwithstanding Section A.12.1 and Section A.12.2, the Plan shall not be considered a Top-Heavy Plan for any Plan Year in which the Plan is a part of a Required Aggregation Group or a Permissive Aggregation Group which is not a Top-Heavy Group. 28 47 A.13 "Top-Heavy Valuation Date" means the Determination Date. ARTICLE B. PROVISIONS RELATING TO TOP-HEAVY PLAN. Notwithstanding anything in the Plan to the contrary, if the Plan is a Top-Heavy Plan within the meaning of Section A.12 and Code section 416(g) for any Plan Year, then the Plan shall meet the requirements of Section B.1, Section B.2 and Section B.3 for any such Plan Year. If the Plan is a Super Top-Heavy Plan for any Plan Year, then in addition to meeting the requirements of Sections B.1 through B.4, it shall also meet the requirements of Section B.4. B.1 Minimum Vesting Requirements. The vested interest of a Participant who is credited with an Hour of Service after the Plan becomes a Top-Heavy Plan will be determined under a schedule that is not less favorable to the Participant than the following: Years of Service Vested Interest Less than two 0% Two but less than three 20% Three but less than four 40% Four but less than five 60% Five but less than six 80% Six or more 100% B.2 Minimum Contribution Requirement. B.2.1 The Employer will meet the minimum benefit and contribution requirements of Code section 416(s) by providing a minimum benefit that complies with Code section 416(c) (1) under the Pension Plan for such Plan Year for each Participant who is a Non-Key Employee and participates in the Pension Plan. B.2.2 For each Participant who is a Non-Key Employee, but who does not participate in the Pension Plan, this Plan shall provide a minimum contribution allocation for such Plan Year for each Participant who is a Non-Key Employee in an amount equal to at least 3% of such Participant's Compensation for such Plan Year. Such 3% minimum contribution requirement shall be increased to 4% for any Plan Year in which the Employer also maintains a Defined Benefit Plan if necessary to avoid the application of Code section 416(h)(1), relating to special adjustments to the Code section 415 limits for Top-Heavy Plans, if the adjusted limitations of Code section 416(h)(1) would otherwise be exceeded if such minimum contribution were not so increased. B.2.3 For each Participant who is a Non-Key Employee, and who also participates in the Pension Plan for the Plan Year, the Plan will provide a minimum contribution allocation in an amount equal to at least 5% of such Participant's Compensation for such Plan Year. Such 5% minimum contribution requirement shall be increased to 7-1/2% for any Plan Year in 29 48 which the Employer also maintains such plan if necessary to avoid the application of Code section 416(h)(1), relating to special adjustments to the Code section 415 limits for Top-Heavy Plans, if the adjusted limitations of Code section 416(h)(1) would otherwise be exceeded if such minimum contribution were not so increased. B.2.4 The minimum contribution requirements set forth above shall be reduced in the following circumstances: B.2.4.1 The percentage minimum contribution required hereunder shall in no event exceed the percentage contribution made for the Key Employee for whom such percentage is the highest for the Plan Year after taking into account contributions or benefits under other qualified plans in an Aggregation Group of which the Plan is a part; and B.2.4.2 No minimum contribution will be required (or the minimum contribution will be reduced, as the case may be) for a Participant under this Plan for any Plan Year if the Employer maintains another qualified plan under which a minimum benefit or contribution is being accrued or made for such year in whole or in part for the Participant in accordance with Code section 416(c). B.2.4.3 The minimum contribution shall be made for each Non-Key Employee who is employed at the end of the Plan Year in question, regardless of whether such Non-Key Employee has been credited with 1,000 Yours of Service in such Plan Year and regardless of such Non-Key Employee's level of Compensation and whether such Non- Key Employee elected to make contributions under Section 4.1 of the Plan for such Plan Year. B.3 Change in Top-Heavy Status. If the Plan becomes a Top-Heavy Plan and subsequently ceases to be a Top-Heavy Plan, the vesting schedule in Section B.1 shall continue to apply in determining the vested percentage of the Account of any Participant who had at least three Years of Service as of the last day of the last Plan Year in which the Plan was a Top-Heavy Plan. For all other Participants, the vesting schedule in Section B.1 shall apply only to their Accounts as of such last day. B.4 Adjustment for Super Top-Heavy Plan. If the Plan is a Super Top-Heavy Plan for any Plan Year, then for purposes of Section 7.3 the defined contribution fraction and the defined benefit fraction shall be adjusted in the manner described in Code section 416(h)(1). 30 49 APPENDIX B LIST OF DESIGNATED SUBSIDIARIES American Water Works Company, Inc. American Commonwealth Company American Commonwealth Management Services Company, Inc. American International Water Services Company American Water Works Service Company, Inc. California-American Water Company Greenwich Water System, Inc. Connecticut-American Water Company Hampton Water Works Company Massachusetts-American Water Company New York-American Water Company, Inc. The Salisbury Water Supply Company Illinois-American Water Company Indiana-American Water Company, Inc. Iowa-American Water Company Kentucky-American Water Company Maryland-American Water Company Missouri-American Water Company New Jersey-American Water Company, Inc. New Mexico-American Water Company, Inc. Northern Michigan Water Company Occoquan Land Corporation Ohio-American Water Company Ohio Suburban Water Company Paradise Valley Water Company Pennsylvania-American Water Company Tennessee-American Water Company Virginia-American Water Company West Virginia-American Water Company Bluefield Valley Water Works Company 31 50 EXHIBIT 10(f) AMERICAN WATER WORKS COMPANY, INC. LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN 51 LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN --------------------------- I. PURPOSE The purpose of the Plan is to promote the success of the Company by linking incentive opportunities to stockholder gains and enabling the Company to attract and retain individuals of outstanding ability. II. DEFINITIONS A. Award: An Award granted pursuant to Section VI. hereof. B. Award Agreement: An agreement entered into between the Company and a Participant, setting forth the terms and conditions applicable to the Award granted to the Participant. C. Board: The Board of Directors of the Company. D. Change of Control Event: A Change of Control Event occurs when any person or group acquires or announces an offer for 25% or more of the Company's Common Stock or when, during any two consecutive calendar years, individuals who at the beginning of such period were members of the Board of Directors cease for any reason to constitute at least a majority of the Board of Directors. E. Committee: The Compensation and Management Development Committee of the Board. F. Common Stock: The Common Stock of the Company (par value of $1.25 per share) or any security of the Company issued in substitution, exchange, or in lieu thereof. G. Company: American Water Works Company, Inc. a Delaware corporation, its successors and assigns. Except where the context indicates otherwise, Company shall include such Subsidiaries as shall be designated by the Board to participate in the Plan. H. Earnings Per Share Growth: The average percentage change in earnings per share, as reported in the Company's annual report 1 52 to stockholders during the Performance Cycle, but without regard to any extraordinary items determined in accordance with generally accepted accounting principles consistently applied. I. Effective Date: January 1, 1993, the date as of which the first Performance Cycle commenced. J. Exchange Act: The Securities Exchange Act of 1934, and any successor statute, as it may be amended from time to time. K. Insider: Any person who is subject to Section 16. L. Market Price: The average of the closing sale prices of the Company's Common Stock as reported on the New York Stock Exchange Composite Transaction Tape during the twenty trading-day period consisting of the last ten trading days of December and the first ten trading days of January. For any Plan Year, Market Price for or at the beginning of such Plan Year shall be determined by reference to the twenty-day trading period commencing in the immediately preceding Plan Year, and Market Price for or at the end of such Plan Year shall be determined by reference to the twenty-day trading period ending in the immediately succeeding Plan Year. M. Participant: An executive or other key employee of the Company designated by the Committee to receive an Award under the Plan. N. Performance Cycle: A period of three consecutive Plan Years, over which performance against the Performance Cycle Goals is to be measured. O. Performance Cycle Goals: The performance goals established by the Committee for a Performance Cycle. P. Peer Group: Those water utility companies designated by the Committee as members of a comparison group for a Performance Cycle. Q. Plan Year: The calendar year. R. President: The President and Chief Executive Officer of the Company. S. Section 16: Section 16 of the Exchange Act, and any successor statutory provision, and the rules promulgated thereunder, as it or they may be amended from time to time. 2 53 T. Subsidiary: Any corporation in which the Company, directly or indirectly, controls a majority of the voting stock. U. Total Return to Stockholders: The average return to stockholders for each Plan Year of the Performance Cycle, where, for each such Plan Year, return to stockholders is measured by dividing (i) the sum of the cumulative dividends for such Plan Year, assuming dividend reinvestment, and the difference between the Market Price at the end and at the beginning of such Plan Year by (ii) the Market Price at the beginning of such Plan Year. III. ADMINISTRATION A. The Plan shall be administered by the Committee, which shall have the full power, subject to, and within the limits of the Plan, to (i) make, interpret and approve all rules for the administration of the Plan, (ii) exercise all powers allocated to it under the Plan, (iii) determine the time when Awards will be granted and the terms and conditions thereof and (iv) exercise all other powers and perform all other acts in connection with the Plan as it deems necessary or appropriate. B. The Committee shall, from time to time, consult with the President and receive and consider his recommendations regarding the Plan. Notwithstanding the foregoing, the Committee shall have the sole power and authority to adopt, amend and rescind administrative guidelines, rules and regulations pertaining to the Plan; to accept, modify or reject recommendations of the President; to set final Awards; and to interpret and rule on any questions pertaining to the Plan. C. No member of the Committee shall be eligible to participate in the Plan. D. The Committee shall be constituted so as to permit the Plan to comply with the administration requirement of Rule 16b-3(c)(2)(i) of the Exchange Act. A majority of the members of the Committee shall constitute a quorum. The vote of a majority of a quorum shall constitute action by the Committee. E. It is the intent of the Company that this Plan and Awards hereunder satisfy, and be interpreted in a manner that in the case of Participants who are or may be Insiders, satisfy the applicable requirements of Rule 16b-3 of the Exchange Act, so that such persons will be entitled to the benefits of Rule 16b-3, or other exemptive rules under Section 16, and will not 3 54 be subjected to avoidable liability thereunder. If any provision of this Plan or of any Award would otherwise frustrate or conflict with the intent expressed in this Section, that provision to the extent possible shall be interpreted and deemed amended so as to avoid such conflict. To the extent of any remaining irreconcilable conflict with such intent, such provision shall be deemed void as applicable to Insiders. F. The actions and determinations of the Committee on all matters relating to the Plan and any Awards thereunder shall be final and conclusive. G. No member of the Committee or the Board shall be liable for any action taken or determination made in good faith with respect to the Plan or any Award thereunder, and the Company shall defend the Committee and Board members for any actions taken or decisions made in good faith under the Plan. IV. PARTICIPATION Executives and other key employees of the Company who are designated from time to time by the Committee will be eligible for Awards. The receipt of an Award shall not confer upon any Participant the right to receive any additional Awards. V. PERFORMANCE CYCLE GOALS A. Performance Cycle Goals for each Performance Cycle will be recommended by the President and established by the Committee based on Earnings Per Share Growth and Total Return to Stockholders relative to the Peer Group. The Committee may also establish Performance Cycle Goals based on individual Participant, subsidiary, unit or division performance, or any combination thereof, provided, however, that in the case of a Participant who is not an Insider, the President may establish such other Performance Goals as he deems appropriate. B. Once a Performance Cycle has commenced and Performance Cycle Goals have been established, such goals may not be changed for such Performance Cycle except in the event of (i) a significant acquisition of another business by the Company, (ii) a disposition of a significant part of the business by the Company, (iii) any significant changes due to legislation or regulations adversely affecting the operation of the Plan or (iv) any other extraordinary event, all as determined by the Committee. 4 55 VI. TARGET INCENTIVE AWARDS A. An Award will entitle a Participant to receive a specified amount determined by the Committee if the terms and conditions specified in the Award Agreement are satisfied. Each Award shall be subject to the following terms and conditions, and to such other terms and conditions, including but not limited to, restrictions upon any cash, Common Stock, or any combination thereof, issued in respect of the Award, as the Committee, in its discretion, shall establish, and shall be embodied in the Award Agreement. B. The Committee shall determine the value or range of values, including the maximum value, of an Award to each Participant. The value of each Award shall be based in whole or in part on the Market Value of the Common Stock, and dividends paid with respect thereto, and the extent to which the Performance Cycle Goals have been attained. Awards may be issued in different classes or series having different names, terms, and conditions. C. The President shall report to the Committee regarding actual performance as soon as practicable following the conclusion of each Performance Cycle. The Committee shall determine the extent to which the Performance Cycle Goals have been met; provided, however, that in the case of a Participant who is not an Insider, the President shall determine the extent to which the Performance Cycle Goals, if any, established by the President pursuant to Section V.A. with respect to such Participant have been met. Anything in this Plan to the contrary notwithstanding, the amount paid to a Participant shall not exceed the maximum value of the Award established by the Committee and set forth in the Award Agreement. D. In the event of the termination of employment of a Participant during a Performance Cycle due to death, disability or retirement on or after attaining age 62, Awards shall become vested on a pro rata basis, provided the Participant has been an employee for at least one Plan Year during the Performance Cycle. In all other cases of termination, Awards shall be forfeited. E. All Awards shall be paid as soon as practicable after the end of the Performance Cycle to which the Award relates. Awards may be paid in the form of cash, restricted shares of Common Stock, or a combination of both. Awards paid in the form of restricted shares of Common Stock shall be subject to such restrictions as the Committee shall determine. 5 56 F. The Committee may, in its discretion, provide for the deferral of any component of the Award and the terms and conditions thereof. G. Upon a Change of Control Event, all Awards which have been earned by Participants shall immediately vest and all restrictions applicable to the Awards shall immediately expire. In addition, for the Performance Cycles not yet concluded at the time of a Change of Control Event, pro rata Awards for each of those Performance Cycles shall be paid to each Participant as soon as practicable and each such Award shall be vested and without restriction. VII. SHARES RESERVED The number of shares of Common Stock authorized to be issued pursuant to the Plan is 350,000 shares. Common Stock may be issued from authorized and unissued shares or out of shares held in the Company's treasury, or both. VIII. AMENDMENTS All amendments to the Plan shall be in writing and shall be effective when adopted by the Board, provided that no amendment shall be made to increase the number of shares of Common Stock authorized or available under the Plan without stockholder approval. IX. OTHER PROVISIONS A. The following provisions shall apply to all Common Stock authorized for issuance under the Plan. 1. In the event of a stock dividend, stock split or other subdivision or combination of the Common Stock, the number of shares of Common Stock authorized under the Plan will be adjusted proportionately. Similarly, in any such event there will be a proportionate adjustment in the number of shares of Common Stock subject to restriction. 2. In the event that the outstanding shares of Common Stock are changed or converted into, or exchanged or exchangeable for, a different number or kind of shares or other securities of the Company or of another corporation by reason of a reorganization, merger, consolidation, reclassification or combination, appropriate adjustment shall be made by the Board in the number of shares and kind of Common Stock for which Awards may be or may have 6 57 been made under the Plan, to the end that the proportionate interests of Participants shall be maintained as before the occurrence of such event. B. No Award pursuant to the Plan shall be transferable or assignable by a Participant other than by will or the laws of descent and distribution and during the lifetime of a Participant shall be exercisable or payable only by or to him. C. The Company shall deduct from all Awards paid hereunder any federal, state or local taxes required by law to be withheld. D. Subject to stockholder approval, the Plan will become effective January 1, 1993. The Board may terminate the Plan at any time, effective at the end of the then-current Plan Year. E. This Plan shall be construed in accordance with and governed by the laws of the State of Delaware, without regard to the conflict of law rules thereof. F. The Committee's determinations under the Plan need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, Awards under the Plan, whether or not such persons are similarly situated. Without limiting the generality of the foregoing, the Committee will be entitled, among other things, to make non-uniform and selective determinations and to establish non-uniform and selective Awards; provided, however, the Committee may not increase the amount of compensation that would otherwise be payable upon achievement of the Performance Cycle Goals. G. Nothing contained in the Plan will be deemed in any way to limit or restrict the Company or the Committee from making any Award or payment to any person under any other plan, arrangement or understanding, whether now existing or hereafter in effect. H. If payments are legally required to be made to any person other than the person to whom any amount is available under the Plan, payments will be made accordingly. Any such payment will be a complete discharge of the liability of the Company. I. No provision of the Plan will require the Company, for the purpose of satisfying any obligations under the Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made or otherwise to segregate any assets, nor will the Company maintain separate bank accounts, 7 58 books, records or other evidence of the existence of a segregated or separately maintained or administered fund for such purposes. Participants will have no rights under the Plan other than as unsecured general creditors of the Company, except that insofar as they may have become entitled to payment of additional compensation by performance of services, they will have the same rights as other employees under generally applicable law. J. Nothing contained in this Plan will confer upon any employee or Participant any right to continue in the employ or other service of the Company or constitute any contract or limit in any way the right of the Company to change such person's compensation or other benefits or to terminate the employment or other service of such person, with or without cause. K. The headings contained herein are for the purposes of convenience only, and in the event of any conflict, the text of the Plan, rather than the headings, will control. L. If any term or provision contained herein is held to any extent invalid or unenforceable, such term or provision will be reformed so that it is valid and such invalidity or unenforceability will not affect any other provision or part hereof. 8 EX-13 3 59 (Page 22 of the 1994 Annual Report) EXHIBIT 13 American Water Works Company, Inc., and Subsidiary Companies CONSOLIDATED SUMMARY OF SELECTED FINANCIAL DATA (Dollars in thousands, except per share amounts)
For the years ended December 31, 1994 1993 1992 1991 1990 ====================================================================================================== Revenues Water service Residential $ 431,225 $ 399,916 $ 360,800 $ 347,241 $ 310,060 Commercial 169,532 159,335 147,983 143,528 129,976 Industrial 53,049 50,490 47,492 47,071 44,464 Public and other 90,436 84,861 79,196 76,899 69,006 Other water revenues 6,502 5,579 5,372 4,899 3,925 - ------------------------------------------------------------------------------------------------------ 750,744 700,181 640,843 619,638 557,431 Wastewater service 13,933 12,143 11,391 10,427 10,157 Authority management fees 5,564 5,213 5,126 5,914 5,350 - ------------------------------------------------------------------------------------------------------ $ 770,241 $ 717,537 $ 657,360 $ 635,979 $ 572,938 ========================================================== Water sales (million gallons) Residential 113,950 104,721 97,992 99,855 98,069 Commercial 60,901 57,880 55,587 57,144 56,442 Industrial 34,735 33,040 32,681 33,702 34,804 Public and other 26,953 25,172 24,349 25,172 23,539 - ------------------------------------------------------------------------------------------------------ 236,539 220,813 210,609 215,873 212,854 ========================================================== Net income $ 78,652 $ 75,387 $ 68,160 $ 73,593 $ 57,088 Earnings per common share on average shares outstanding $ 2.34 $ 2.29 $ 2.07 $ 2.27 $ 1.85 Common dividends paid per share $ 1.08 $ 1.00 $ 0.925 $ 0.86 $ 0.80 AT YEAR-END Customers (thousands) 1,706 1,685 1,548 1,529 1,514 Total assets $3,206,654 $2,994,011 $2,415,805 $2,240,503 $2,092,596 Preferred stocks with mandatory redemption requirements American Water Works Company, Inc. $ 40,000 $ 40,000 $ 40,480 $ 40,960 $ 1,690 Subsidiaries 43,737 46,515 50,895 47,107 27,664 Long-term debt American Water Works Company, Inc. $ 131,000 $ 131,000 $ 73,200 $ 73,200 $ 74,400 Subsidiaries 1,177,043 1,056,404 870,940 874,804 725,291 Market price of common stock at year-end $ 27.00 $ 30.00 $ 27.38 $ 26.50 $ 16.00
60 (Page 23 of the 1994 Annual Report) American Water Works Company, Inc., and Subsidiary Companies MANAGEMENT'S DISCUSSION AND ANALYSIS DESCRIPTION OF THE BUSINESS THE COMPANY The principal business of American Water Works Company is the ownership of common stock of companies providing water supply service. THE SERVICE COMPANY The American Water Works Service Company, a subsidiary, provides professional and staff services as required to affiliated companies. These services include accounting, engineering, operations, finance, water quality, information systems, personnel administration and training, purchasing, insurance, safety, and community relations. This arrangement, which provides services at cost, affords affiliated companies support otherwise unavailable economically or on a timely basis. The regulated companies with less than 100,000 customers have a greater need to utilize these services than do larger companies. THE REGULATED COMPANIES The 23 regulated subsidiary companies provide water service to approximately six million people in 734 communities in 21 states. As public utilities, the regulated companies function under rules and regulations prescribed by state regulatory commissions. Further, each company is subject to the rules of both federal and state environmental protection agencies, particularly with respect to the quality of the water they distribute. AMERICAN COMMONWEALTH MANAGEMENT SERVICES COMPANY American Commonwealth Management Services Company provides management and operating services, at a profit, to non-affiliated water and wastewater systems. These services are provided under contract to various authorities, utilities and businesses in Pennsylvania, Massachusetts, Delaware and Florida. This subsidiary also owns a carbon regeneration facility. These capabilities are being marketed to affiliated and non-affiliated water utilities throughout the country. Carbon is widely used for water filtration. AmericanAnglian Environmental Technologies, a joint venture of American Commonwealth Management Services Company and Anglian Water Plc, a British water and wastewater utility, provides both technical expertise and financing to help communities throughout the United States upgrade their wastewater treatment systems. OTHER NON-REGULATED COMPANIES Greenwich Water System and American Commonwealth Company are non-regulated subholding companies. Occoquan Land Corporation owns land, buildings and equipment, most of which are leased to affiliated companies. THE PHILOSOPHY OF AMERICAN WATER WORKS COMPANY American Water Works Company is dedicated to providing the best water service at the lowest cost consistent with adequate compensation for investors and reasonable wages and benefits for its personnel. We believe there is an unalterable link between quality service, responsive regulation and financial success. Three basic principles are observed under this management philosophy: 1. The preservation and efficient utilization of capital assets are assured by a management approach that draws upon prudent planning, builds consensus and acts decisively on a timely basis. 2. A regulated subsidiary must exhibit the ability to attract the capital it requires as a prerequisite to the initiation of construction of facilities needed to meet water service demands. 3. The ability to raise needed capital is dependent upon consistently achieving adequate earnings. This dictates a diligent pursuit of regulatory decisions acknowledging this principle. In accordance with this philosophy, the company seeks to enhance the value of its shareholders' investment through consistent earnings growth generated by earnings reinvestment. The market value of the company's common stock is subject to the volatility always present in the stock market, as well as to the vagaries of the national economy. The true worth of this stock should be measured by the intrinsic value of the assets of American Water Works and the quality of the organization put in place by the management team. These assets are used to provide a service which is essential for living. There is no substitute for water. 61 (Page 24 of the 1994 Annual Report) MANAGEMENT'S DISCUSSION AND ANALYSIS THE INVESTMENT STRATEGY OF AMERICAN WATER WORKS COMPANY The business of the company is the investment in common stock of water utilities. The purpose of this business is to protect and enhance the value of our shareholders' investment through growth in earnings and dividends per share. We seek to accomplish this purpose without diluting earnings to existing shareholders. Viewed over the long term, we believe this strategy maximizes the total return to our shareholders. The value of investment in the company increases due to earnings growth. Earnings growth results from increased investment by the company in its subsidiaries funded by the sale of securities and reinvestment of income. The following chart reflects the results of this investment strategy: COMPOUND ANNUAL GROWTH RATES 1989-1994 [ID: GRAPHIC -- BAR CHART] 9.4% 7.9% 8.4% 7.9% 7.0% Investment Operating Earnings Dividends Book value in subsidiaries revenue per share per share per share The company's investment in its subsidiaries has increased from $573,038,000 at year-end 1989 to $898,219,000 at year-end 1994. The top schedule on page 25 shows how this has been accomplished. This analysis illustrates that the growth in the company's investment in its subsidiaries has been accomplished by subsidiary earnings retention, the investment of a portion of the dividends received by the company from subsidiaries, the sale of securities and bank loans. Earnings to common shareholders have risen from $47,591,000 in 1989 to $74,668,000 in 1994. Income to common shareholders of the company is influenced by three factors: 1. The amount of investment by the company 2. The rate of return on that investment 3. The costs to operate the company The bottom schedule on page 25 demonstrates the source of change since 1989 in income to common stock. This analysis shows that the growth in earnings over this period is the direct result of new investment in subsidiaries. Fluctuations in the rate of return are the result of the influence of weather conditions on sales volume and the response of utility regulation to the economic climate. The cost to operate the company has increased $8,503,000 over this five-year period. SYSTEM GROWTH AND DEVELOPMENT CAPITAL SPENDING PROGRAM The investment in new facilities in 1994 totaled $265,739,000, which was 38% above 1993 construction expenditures of $193,116,000. Construction activity planned for 1995 totals $314,000,000. Expenditures recorded in any given year are influenced by many factors, including the economy, regulation, material delivery and weather conditions. It is anticipated that approximately $1,500,000,000 will be invested in new facilities between now and 1999. These expenditures will support ongoing programs to comply with regulations promulgated to ensure water quality and protect the environment; to keep pace with the development of our service territories; and to replace plant as necessary. We expect the investment in this construction program to be recognized in regulatory decisions. 62 (Page 25 of the 1994 Annual Report) American Water Works Company, Inc., and Subsidiary Companies
ANALYSIS OF GROWTH IN INVESTMENT IN SUBSIDIARIES (000) 1994 1993 1992 1991 1990 ========================================================================================================= Investment in subsidiaries at December 31 $898,219 $810,372 $749,513 $693,312 $636,622 Investment in subsidiaries at January 1 810,372 749,513 693,312 636,622 573,038 - --------------------------------------------------------------------------------------------------------- Change during the year $ 87,847 $ 60,859 $ 56,201 $ 56,690 $ 63,584 ==================================================== Sources of additional investment Undistributed earnings of subsidiaries $ 24,532 $ 18,984 $ 19,401 $ 15,690 $ 24,076 Investment by the company in subsidiary securities 63,315 41,875 36,800 41,000 39,508 - --------------------------------------------------------------------------------------------------------- Change during the year $ 87,847 $ 60,859 $ 56,201 $ 56,690 $ 63,584 ==================================================== Net income of subsidiaries $ 89,449 $ 84,248 $ 75,260 $ 80,692 $ 64,408 Return on January 1 investment in subsidiaries 11.0% 11.2% 10.9% 12.7% 11.2% Subsidiaries' common stock dividend payout ratio 73% 77% 74% 81% 63% - --------------------------------------------------------------------------------------------------------- Dividends to the company from subsidiaries $ 64,917 $ 65,264 $ 55,859 $ 65,002 $ 40,332 - --------------------------------------------------------------------------------------------------------- Company's use of cash Mandatory redemption of securities -- 480 1,680 16,930 2,680 Preferred dividends 3,984 3,996 4,019 3,420 690 Other cash requirements 10,744 7,556 6,630 8,471 7,306 - --------------------------------------------------------------------------------------------------------- 14,728 12,032 12,329 28,821 10,676 - --------------------------------------------------------------------------------------------------------- Available for common dividends 50,189 53,232 43,530 36,181 29,656 Common dividends declared 34,386 31,130 28,609 26,423 24,421 Cash payout ratio 69% 58% 66% 73% 82% Available after dividends 15,803 22,102 14,921 9,758 5,235 Cash at January 1 23,302 78 15 23 6,993 - --------------------------------------------------------------------------------------------------------- 39,105 22,180 14,936 9,781 12,228 Investment in securities of subsidiaries (63,315) (41,875) (36,800) (41,000) (39,508) Notes and advances to subsidiaries 4,510 1,010 5,210 1,015 (3,190) - --------------------------------------------------------------------------------------------------------- (19,700) (18,685) (16,654) (30,204) (30,470) - --------------------------------------------------------------------------------------------------------- Net bank borrowings -- (21,255) 11,425 (13,255) 23,085 Proceeds from long-term debt -- 81,000 -- -- 5,000 Proceeds from preferred stock -- -- -- 40,000 -- Proceeds from common stock 37,347 5,442 5,307 3,474 2,408 Early redemption of securities -- (23,200) -- -- -- - --------------------------------------------------------------------------------------------------------- 37,347 41,987 16,732 30,219 30,493 - --------------------------------------------------------------------------------------------------------- Cash at December 31 $ 17,647 $ 23,302 $ 78 $ 15 $ 23 ====================================================
ANALYSIS OF CHANGE IN INCOME (000) 1994 1993 1992 1991 1990 - --------------------------------------------------------------------------------------------------------- Net income to common stock-current year $ 74,668 $ 71,391 $ 64,141 $ 69,890 $ 56,398 Net income to common stock-prior year 71,391 64,141 69,890 56,398 47,591 - --------------------------------------------------------------------------------------------------------- Change in income 3,277 7,250 (5,749) 13,492 8,807 Change in company operating cost 1,924 1,738 317 2,792 1,732 - --------------------------------------------------------------------------------------------------------- Change in investment income $ 5,201 $ 8,988 $ (5,432) $ 16,284 $ 10,539 ==================================================== Sources of change in investment income Additional investment in subsidiaries $ 6,718 $ 6,317 $ 6,154 $ 8,059 $ 6,614 Change in rate of return on investment (1,517) 2,671 (11,586) 8,225 3,925 - --------------------------------------------------------------------------------------------------------- Total change in investment income $ 5,201 $ 8,988 $ (5,432) $ 16,284 $ 10,539 ====================================================
63 (Page 26 of the 1994 Annual Report) MANAGEMENT'S DISCUSSION AND ANALYSIS Investment in new transmission and distribution facilities accounted for 41% of the 1994 expenditures. Significant projects included construction of sections of 20-inch through 54-inch transmission mains for the Tri-County Water Supply Project which will provide a regional supply for southern New Jersey in 1996. Kentucky-American Water Company installed approximately 10 miles of 24-inch pipe to serve developing areas. Pennsylvania-American Water Company completed the installation of approximately 4 miles of 16-inch main to connect its Hershey service area to the recently acquired Skyline Water Company. Similarly, Illinois-American Water Company completed the installation of 10 miles of 16-inch main to service the community of Waterloo. Also, construction of several additional distribution storage facilities was completed during the year. Investment in water production, treatment and pumping facilities accounted for 31% of 1994 construction expenditures. During 1994, significant water production facility improvements were completed in Kane, Frackville, Indiana, and Pittsburgh, Pennsylvania; Haddon Heights and Short Hills, New Jersey; East St. Louis and Pekin, Illinois; Tiffin, Ohio; Seymour, Indiana; and Charleston, West Virginia. An innovative treatment plant, which uses ozone to treat a ground water supply, was constructed by California-American Water Company in its Monterey service area. Significant renovations were also made to the filter plants in St. Joseph, Missouri and Alton, Illinois in response to the damage caused by flooding during the summer of 1993. Work continues on the 30 million gallons-per-day treatment plant on the Delaware River by New Jersey-American Water Company as part of the Tri-County Water Supply Project that will supplement community water supplies in three counties. Expenditures for customer service lines, meters and fire hydrants accounted for 15% of 1994 construction expenditures. These expenditures reflect ongoing programs to ensure meter accuracy, install and replace fire hydrants, and provide service to new customers. Additional water supply projects in 1994 included the construction of new and replacement wells by New Jersey-American and California-American. New Jersey-American also converted an existing well to aquifer storage and recovery, an innovative technique used to store finished water in an aquifer for future withdrawal. Investigations to supplement or replace existing supplies are ongoing in Alton and Peoria, Illinois; St. Joseph, Missouri; Tiffin, Ohio; Hampton, New Hampshire; and southern Indiana. During 1994, the use of regional supply resources supplemented the supply available to both Connecticut-American Water Company and California-American. Source of supply projects accounted for approximately 4% of the 1994 construction expenditures. Engineering analysis remained focused on the importance of having adequate source of supply and production facilities in every service area. This goal has been achieved at most systems and was aggressively addressed at the locations where challenges still remain due to projected growth or existing source limitations. Detailed source of supply and production planning was undertaken in Greenwich, Connecticut; Salisbury, Massachusetts; and Hopewell and Dale City, Virginia. In addition, the company's comprehensive planning program proceeded, with reports completed for New Jersey-American's Burlington, Camden, Ocean, Middlesex and Monmouth counties water service areas and Ocean City and Lakewood wastewater systems. Comprehensive Planning Studies were also completed for the New Mexico-American and Missouri-American water companies.
CONSTRUCTION EXPENDITURES BY CATEGORY (000) 1994 1993 1992 1991 1990 ======================================================================================= Water plant Sources of supply $ 11,511 $ 8,054 $ 9,110 $ 10,498 $ 8,882 Treatment and pumping 82,700 51,332 53,303 53,361 66,902 Transmission and distribution 108,929 77,998 80,357 63,232 66,752 Services, meters and fire hydrants 40,506 34,401 33,989 31,000 31,321 General structures and equipment 20,703 19,585 17,935 23,698 23,479 Wastewater plant 1,390 1,746 2,885 1,198 1,952 - --------------------------------------------------------------------------------------- $265,739 $193,116 $197,579 $182,987 $199,288 ================================================
64 (Page 27 of the 1994 Annual Report) American Water Works Company, Inc., and Subsidiary Companies ACQUISITIONS OF WATER SYSTEMS In addition to the investment of capital in facilities which are absolutely essential to safe and reliable water service, we continue to search for opportunities to acquire water systems that represent the prospect for enhanced shareholder value. In that regard, California-American Water Company has proposed to acquire for $300,000,000 the water and wastewater systems of the Santa Margarita Water District in Orange County, California. Santa Margarita is a public water district that serves a population of 80,000 with the potential for expansion to 180,000 people. California-American has proposed to defease the district's outstanding debt, acquire the assets of the district and assume its service obligations. The proposed acquisition requires action by two government commissions. The Orange County Local Agency Formation Commission must decide if the district will be dissolved and its assets sold to California-American. The California Public Utilities Commission will decide whether to authorize the company to provide services to the district's customers and the rates charged. If approved after public hearings, California-American expects to complete the acquisition in 1995. New Jersey-American Water Company acquired three water supply systems in 1994 for $4,932,000. In June, nearly 9,000 people who formerly received water from the Borough of Highlands Water Department began to receive service from the company. In September, the company acquired the Brookside Water Company in Oxford Township of Warren County serving 300 people. In October, the company took over the Brookside portion of the Southeast Morris County Municipal Utilities Authority in Mendham Township serving 800 people. In 1994, Pennsylvania-American Water Company paid $560,000 for two water systems. The Municipal Authority of Gregg Township which serves 300 people was acquired in May. In August, the Paris-Florence Water Association, serving 2,300 people in northwestern Washington County, was purchased. California-American Water Company purchased the Carmel Valley Mutual Water Company situated in the "Hidden Hills" area in 1994. Serving a population of 1,100, it was acquired for $519,000. During 1994, the integration of utilities acquired in 1993 in Indiana, Missouri, Ohio and Michigan was completed, resulting in more efficient and productive water service. A total of $62,000,000 was paid for the common stock of these Midwestern utilities that serve a population of approximately 355,000 in 17 communities. The acquired utilities in Indiana and Missouri were merged with American Water's existing subsidiaries in those states effective January 1, 1995. The community served by the acquired utility in Ohio is pursuing acquisition of those facilities that serve a population of approximately 40,000. RESULTS OF OPERATIONS American Water's experience in assessing the impact of inflation on its business indicates that with timely rate increases authorized by regulators, water revenue can be made to keep pace with inflation. Inflation did not significantly impact the company's financial position or results of operations in 1992 through 1994, and it is not expected to materially affect 1995 results. The company's results of operations for the year ended December 31, 1994 included a full year of results from the four acquired Midwestern companies' operations, compared to the 1993 results of operations which reflected four months of those companies' results.
OPERATING REVENUES (000) 1994 1993 1992 =============================================================== Water service $750,744 $700,181 $640,843 Wastewater service 13,933 12,143 11,391 Authority management fees 5,564 5,213 5,126 - --------------------------------------------------------------- $770,241 $717,537 $657,360 ===============================================================
CONSOLIDATED OPERATING REVENUES Revenues in 1994 totaled $770,241,000 and were 7% above those for 1993. The volume of water sold increased 7% to 236.5 billion gallons in 1994, primarily due to the company's August 1993 acquisition of the four Midwestern water utilities. Lower summer water sales in the Northeast due to more frequent rainfall than in 1993 were offset by increased sales in the West and Midwest, demonstrating the importance of the company's geographical diversity. In 1994, the Midwest acquisition increased operating revenues by $22,700,000 and added 11.6 billion gallons in water sales volume in comparison to 1993. 65 (Page 28 of the 1994 Annual Report) MANAGEMENT'S DISCUSSION AND ANALYSIS Rate authorizations adjusted the water service rates in effect for ten regulated companies during 1994. These authorizations are expected to increase annual revenues by $27,145,000. Operating revenues for 1994 included approximately $10,432,000 which resulted from these rate orders. To date in 1995, one rate adjustment has been authorized for a regulated subsidiary which will generate approximately $1,475,000 of additional annual revenues. Six applications are awaiting regulatory decisions. If granted in full, they would produce additional annual revenues of $36,711,000. Revenues of $717,537,000 in 1993 were 9% above those for 1992, reflecting higher water service rates and increased sales volume. Sixteen regulated companies received rate orders in 1993, authorizing increases in annual revenues aggregating $37,833,000. The 220.8 billion gallons of water sold in 1993 increased 5% compared to 1992. The acquisition of the Midwestern utilities increased operating revenues by $10,600,000 in 1993 and added 5.1 billion gallons in water sales volume.
PERCENTAGE OF WATER REVENUES BY CUSTOMER CLASS 1994 1993 1992 =============================================================== Residential 57.4% 57.1% 56.3% Commercial 22.6% 22.8% 23.1% Industrial 7.1% 7.2% 7.4% Public and other 12.0% 12.1% 12.4% Other water revenues .9% .8% .8% - --------------------------------------------------------------- 100.0% 100.0% 100.0% ================================
Residential Residential water service revenues in 1994 amounted to $431,225,000, an increase of 8% over those for 1993. This 1994 revenue improvement followed an increase of 11% in 1993. The volume of water sold to residential customers increased by 9% in 1994 to 114.0 billion gallons. A 2% increase in the unit price for water due to rate increases was offset by the comparatively low unit price of water sold by the acquired Midwestern utilities, resulting in the average unit price for water in 1994 for residential customers decreasing by 1%. The average unit price had increased by 4% in 1993. Commercial Revenues from commercial customers in 1994 rose by 6% to $169,532,000 following an increase of 8% in 1993. Commercial customers purchased 60.9 billion gallons of water in 1994, 5% more than in 1993. The average unit price of water increased by 1% in 1994, down from a 3% increase in 1993. Industrial Industrial water use of 34.7 billion gallons in 1994 was 5% higher than in 1993. Revenues from industrial sales in the amount of $53,049,000 were 5% above those recorded in 1993 due to the increased sales volume. There was no change in the average unit price of water in 1994. Industrial revenues in 1993 were 6% above those for 1992 due to a 6% increase in the average unit price of water and a 1% increase in sales volume. Excluding the industrial sales of the four acquired Midwestern utilities, the volume of water used by industrial customers increased in 1994 for the first time in six years. Public and Other Public and other revenues in 1994 rose by 7% to $90,436,000 following an increase of 7% in 1993. Revenues derived from municipal governments for fire protection services and customers requiring special private fire service facilities totaled $35,472,000 in 1994, exceeding 1993 revenue from these customers by 6%. The 27.0 billion gallons of water sold to governmental entities and resale customers was 7% above the quantities sold in 1993. Revenues generated by these sales totaled $54,964,000 and exceeded 1993 revenues by 7%.
PERCENTAGE OF WATER SALES (GALLONS) BY CUSTOMER CLASS 1994 1993 1992 =============================================================== Residential 48.2% 47.4% 46.5% Commercial 25.7% 26.2% 26.4% Industrial 14.7% 15.0% 15.5% Public and other 11.4% 11.4% 11.6% - --------------------------------------------------------------- 100.0% 100.0% 100.0% ================================
Wastewater Service Revenues Regulated subsidiaries provide wastewater collection service to two areas in New Jersey and to customers in Ohio. Revenues from these services amounted to $13,933,000 in 1994, compared with $12,143,000 in 1993 and $11,391,000 in 1992. 66 (Page 29 of the 1994 Annual Report) American Water Works Company, Inc., and Subsidiary Companies Authority Management Fees These fees represent charges primarily for management and operating services provided by American Commonwealth Management Services Company to water and wastewater authorities, utilities, and businesses in Pennsylvania, Massachusetts, Delaware and Florida. Fees of $5,564,000 were received for these services in 1994 compared with management fees of $5,213,000 in 1993 and $5,126,000 in 1992.
OPERATING EXPENSES (000) 1994 1993 1992 ==================================================================== Operation and maintenance expenses $391,539 $362,451 $333,212 Depreciation and amortization 72,892 66,838 58,382 General taxes 73,085 67,917 63,612 Income taxes 49,912 47,864 37,661 - -------------------------------------------------------------------- $587,428 $545,070 $492,867 ==================================
CONSOLIDATED OPERATING EXPENSES Operating expenses in 1994 increased by 8% to $587,428,000, following an 11% increase in 1993. The acquisition of the four Midwestern water utilities increased operating expenses by $16,500,000 in 1994 and $7,600,000 in 1993. Excluding the effect of the acquisition, operating expenses increased by 5% in 1994. Operation and maintenance expenses totaled $391,539,000 in 1994, 8% higher than in 1993. They had increased by 9% in 1993. The Midwestern acquisition increased operation and maintenance expenses by $12,400,000 in 1994 and $5,000,000 in 1993. Employee-related costs, representing 48% of operation and maintenance expenses, increased by 9% in 1994 and 8% in 1993. The primary component of employee-related costs are wage and salary expenses, which were up 5% to $143,330,000 in 1994 following a 1% increase in 1993. The increased expenses in 1994 reflect the harsh winter weather conditions throughout most of the eastern half of the country which complicated operations, necessitating a high level of overtime to maintain dependable water service at all times. The number of employees at year end totaled 3,992, 2% below the employment level of 4,062 at the close of 1993 and approximately equal to the 3,982 employees at the end of 1992. Through the acquisition of the four Midwestern water utilities, 158 employees joined the company in 1993. Excluding the employees obtained through this acquisition, the company's work force has decreased by 148 employees or 4% since 1992, as the result of continued efforts to improve operating efficiencies. The company adopted Statement of Financial Accounting Standards No. 106 (SFAS No. 106), "Employers' Accounting for Postretirement Benefits Other Than Pensions," effective January 1, 1993. The effect of adopting the new accounting method increased employee-related expenses by $8,779,000 in 1993, and by an additional $3,520,000 in 1994. The increase in 1994 expenses reflects costs that were being deferred in 1993 pending future recovery in rates. The Statement requires the company to accrue the expected cost of providing postretirement health care and life insurance benefits as employees render the services necessary to earn the benefits in a manner similar to that used to account for pensions. The company's regulated subsidiaries have been pursuing recovery in rates for service of the additional costs resulting from this change in accounting. As of December 31, 1994, 17 decisions reached by regulatory authorities on this matter have permitted such recovery currently or indicated that recovery of these costs will be included in rates within approximately five years from the date of adoption of SFAS No. 106 with the combined deferral recovery period not exceeding approximately 20 years. Two regulatory authorities have denied recovery in current rates, but will continue to allow recovery when the benefits are paid in the future. The outcome of this issue in the rate-making process in one state is presently uncertain. Where recovery is uncertain or has been initially denied, regulated subsidiaries will continue to pursue recovery of the increased costs in rates. Excluding the impact of adopting the new accounting standard, health care expenses in 1994 increased $2,727,000, 12% above those of the prior year, reflecting in part the continuing increases in the cost of medical treatment programs. They had increased by 7% in 1993. The increase in health care expenses has been moderated by certain cost containment measures that were implemented in 1991, including plan options which provide for employee contributions toward the cost of health care benefits. Employee contributions totaled $1,435,000 in 1994 compared with $1,308,000 in 1993 and $952,000 in 1992. 67 (Page 30 of the 1994 Annual Report) MANAGEMENT'S DISCUSSION AND ANALYSIS Pension expense increased by 113% in 1994 to $6,096,000 following a 14% increase in 1993. Pension cost is deferred by certain subsidiaries when it is probable such costs will be recovered in future water service rates as contributions are made to the pension plan. A cash contribution was made to the pension plan in 1994 after a period of several years during which no contributions were made due to the funded status of the plan. Deferrals of pension cost decreased in conjunction with the resumption of contributions, resulting in the large increase in pension expense in 1994.
OPERATION AND MAINTENANCE EXPENSES (000) 1994 1993 1992 ==================================================================== Employee-related costs $187,735 $171,989 $159,488 Fuel and power 33,216 30,530 28,808 Purchased water 40,375 38,628 32,996 Chemicals 13,089 11,605 10,982 Waste disposal 11,994 11,235 10,717 Maintenance materials and services 22,115 21,585 19,026 Operating supplies and services 53,399 48,573 44,710 Customer billing and accounting 14,809 14,442 14,672 Other 14,807 13,864 11,813 - -------------------------------------------------------------------- $391,539 $362,451 $333,212 ==================================
Expenses associated with the collection, treatment and pumping of water include the cost of fuel and power, water purchased from other suppliers, chemicals for water treatment and purification, and waste disposal. These costs increased by 7% in 1994 after a 10% rise in 1993. The unit cost of water produced was unchanged in 1994, after a 5% increase in 1993. Higher purchased water costs, reflecting increased volume and rate increases authorized for utilities supplying water to several subsidiaries, were primarily responsible for the rise in the unit cost of production in 1993. Maintenance materials and services, which include emergency repairs as well as costs for preventive maintenance, increased by 2% in 1994 following a 13% increase in 1993. Maintenance expense was lower than normal in 1992, reflecting preventive maintenance performed in 1991 instead of 1992. Operating supplies and services include the day-to-day expenses of office operation, legal and other professional services, as well as information systems and other office equipment rental charges. These costs increased by 10% in 1994 after a 9% increase in 1993. Customer billing and accounting charges increased by 3% in 1994, and decreased by 2% in 1993. Other operation and maintenance expenses include regulatory costs and casualty and liability insurance premiums. These expenses increased by 7% in 1994 due to increased casualty insurance premiums as a result of claims experience. Other operation and maintenance expenses had increased by 17% in 1993, primarily as a result of increased rate filing activity required to recover increased costs, including the additional costs associated with the change in accounting for postretirement health care and life insurance benefits. Depreciation and amortization increased by 9% in 1994 and 14% in 1993. The higher depreciation expense in both years was primarily due to growth in utility plant in service. General taxes, which include gross receipts, franchise, property, capital stock, payroll and miscellaneous taxes, increased by 8% in 1994 after a 7% rise in 1993. Gross receipts and franchise taxes, which are a function of revenues, increased by 7% in 1994. Property and capital stock taxes are assessed on the basis of tax values assigned to assets or capitalization. These taxes in 1994 were 10% above those in 1993 due to higher property values and tax rate increases. Payroll taxes were up 6% in 1994. Income taxes increased by 4% in 1994, following a 27% increase in 1993. The 1994 increase in income taxes is primarily due to higher taxable income. The Revenue Reconciliation Act of 1993 increased the company's federal income tax rate from 34% to 35%, resulting in a reduction in the company's results of operations for 1993 of approximately $1,200,000. The company's effective tax rate also increased in 1993 due to the reversal of temporary differences (primarily accelerated depreciation for tax purposes on property placed in service prior to 1981) on which the tax benefit was previously flowed through to customers. Details regarding the components of the total amount of state and federal income taxes and a reconciliation of statutory to reported federal income tax expense are included in Note 2 to the financial statements. 68 (Page 31 of the 1994 Annual Report) American Water Works Company, Inc., and Subsidiary Companies
SUMMARY OF TAXES (000) 1994 1993 1992 ============================================================================== Gross receipts and franchise taxes $ 32,168 $ 30,174 $ 28,600 Property and capital stock taxes 27,245 24,664 21,867 Payroll taxes 11,521 10,893 10,733 Miscellaneous taxes 2,151 2,186 2,412 State income taxes 7,718 7,375 6,246 Federal income taxes 42,194 40,489 31,415 - ------------------------------------------------------------------------------ $122,997 $115,781 $101,273 ==================================
CONSOLIDATED INCOME DEDUCTIONS Income deductions -- principally interest expense -- amounted to $112,434,000 in 1994, 10% above those in 1993 due to an increase in total debt to fund construction of new water service assets. They had increased by 3% in 1993. CONSOLIDATED NET INCOME Consolidated net income in 1994 totaled $78,652,000 and was 4% above 1993 net income. Consolidated net income in 1993 was 11% above that recorded in 1992. Consolidated net income to common stock totaled $74,668,000 in 1994 and was 5% above that reported for 1993. It had increased by 11% in 1993.
CAPITALIZATION LONG-TERM PREFERRED COMMON (000) DEBT STOCK EQUITY ================================================================= Company 1994 $ 131,071 $ 51,673 $733,440 1993 131,074 51,673 655,275 1992 73,275 52,153 609,572 1991 74,568 52,633 568,733 1990 90,852 13,363 521,792 Regulated Subsidiaries 1994 $1,251,101 $ 51,738 $856,196 1993 1,060,776 54,532 768,921 1992 966,171 60,093 705,419 1991 919,074 56,812 650,307 1990 763,768 37,376 598,984 Consolidated 1994 $1,381,972 $101,698 $733,440 1993 1,192,809 104,490 655,275 1992 1,036,604 109,529 609,572 1991 986,691 106,726 568,733 1990 847,692 48,018 521,792
CAPITALIZATION RATIOS LONG-TERM PREFERRED COMMON (000) DEBT STOCK EQUITY ================================================================= Company 1994 14% 6% 80% 1993 16% 6% 78% 1992 10% 7% 83% 1991 11% 7% 82% 1990 15% 2% 83% Regulated Subsidiaries 1994 58% 2% 40% 1993 56% 3% 41% 1992 56% 3% 41% 1991 57% 3% 40% 1990 54% 3% 43%
Note: Long-term debt includes amounts due within one year. LIQUIDITY AND CAPITAL RESOURCES Internal sources of cash flow are provided by retention of a portion of earnings, amortization of deferred charges, deferral of taxes, and depreciation. Internal cash generation is influenced by weather patterns, economic conditions and the timing of rate relief. When internal cash generation is not sufficient to meet corporate obligations on a timely basis, external sources of funds are utilized. External cash availability and its cost are dependent upon the consistency and reliability of earnings. Outside sources of cash consist of short-term bank loans, the sale of securities -- bonds, preferred stock and common stock -- as well as advances and contributions from developers. THE PARENT COMPANY The company pays all of its administrative and interest expenses, meets its mandatory contributions to sinking funds and pays dividends on all classes of stock from the dividends received from investments in its subsidiary companies. Remaining funds are retained for additional investment in subsidiaries. Investments are made when prospective returns are expected to continue at an adequate level or the potential for satisfactory earnings has been exhibited. 69 (Page 32 of the 1994 Annual Report) MANAGEMENT'S DISCUSSION AND ANALYSIS Periodically, it is necessary to supplement internal sources of cash flow with short-term bank loans. These loans are repaid as internal sources of cash allow or with proceeds from the periodic issuance of new securities. In 1993, the company amended its dividend reinvestment plan to permit, in addition to the reinvestment of common stock dividends, the purchase of common stock through optional cash payments. The company's shareholders can purchase up to $5,000 of common stock each month directly from the company at a 5% discount from the applicable average market price. Common dividends in the amount of $4,099,000 were reinvested during 1994, which resulted in the issuance of 151,254 new shares of common stock. Proceeds received from optional cash purchases of 1,092,536 new shares of common stock totaled $28,358,000 in 1994, the first full year that such purchases were permitted. Another 82,354 shares of common stock were issued in connection with the Employees' Stock Ownership Plan and 89,300 shares of common stock were issued in connection with the 401(k) Savings Plan for Employees in return for cash contributions from employees totaling $2,580,000 and company contributions with a value of $2,310,000. The company invested $63,315,000 in new shares of common stock of subsidiaries during 1994. It also increased its equity investment in subsidiaries by $24,532,000 from the earnings retained by them. A non- regulated subsidiary repaid in 1994 the entire outstanding balance of $4,500,000 on a note. The company plans to continue to use short-term bank borrowings, as cash requirements warrant, to finance additional investment in subsidiaries. Over the next few years the company expects to issue new securities to repay bank borrowings and finance additional investment in subsidiaries. Common stock is expected to be issued in connection with the continuation of the company's Dividend Reinvestment and Stock Purchase Plan, the Employees' Stock Ownership Plan and the 401(k) Savings Plan for Employees. THE SUBSIDIARY COMPANIES Regulated subsidiary companies fund construction programs and supplement cash flow by borrowing from banks under individual credit lines established annually. It is anticipated that ample credit lines will be available to provide funds needed for 1995 construction requirements and to maintain bank borrowings not yet refinanced on a long-term basis. Bank borrowings are repaid from the proceeds obtained from selling bonds and preferred stock either publicly or to institutional investors on a private placement basis, and selling common stock to the company. Security offerings are made when they are of marketable size, meet indenture and charter requirements and can compete successfully in the capital market. In order to compete successfully, the individual company must have exhibited satisfactory earnings. Capitalization and dividend payout ratios are maintained within a range found acceptable for investor-owned water companies. Aggregate bank borrowings of subsidiaries at year-end 1994 amounted to $82,425,000 compared to $193,620,000 at year-end 1993. The year-end 1993 bank borrowings reflect the acquisition of four Midwestern water utilities and the efforts of subsidiaries to take advantage of lower interest rates by calling certain higher yielding bonds before maturity. During 1994, New Jersey-American issued a total of $100,000,000 of tax exempt mortgage bonds to a state economic development authority which in turn were issued as tax-exempt securities. The interest rate on $65,000,000 of the bonds is 6.875%, and the remaining $35,000,000 had a variable short-term interest rate of 5.05% at year-end 1994 which will be replaced by a fixed long-term interest rate in 1995. Six subsidiaries issued $91,400,000 of taxable mortgage bonds at interest rates between 6.56% and 7.83%, and one subsidiary issued a two-year variable rate $5,000,000 note during 1994. Proceeds from the sale of the bonds were used to repay bank loans, fund construction programs and refinance existing debt at lower rates. The subsidiary companies plan to fund construction programs and repay bank borrowings and maturing bonds with the issuance of approximately $105,700,000 of long-term debt and $72,900,000 of new shares of common stock to the parent company in 1995. Excluding short-term borrowings that may be incurred in connection with the proposed acquisition of the Santa Margarita Water District, the combined amount of subsidiary bank borrowings and bonds maturing within one year is expected to remain at approximately the current level during 1995. 70 (Page 33 of the 1994 Annual Report) American Water Works Company, Inc., and Subsidiary Companies During 1994, subsidiaries repaid $5,845,000 of maturing bonds and certain higher yielding bonds before maturity. In addition, subsidiaries made mandatory payments to sinking funds in amounts adequate to retire $1,458,000 of debt and redeem $2,792,000 of preferred stocks. REGULATION Twenty state commissions regulate the company's utility subsidiaries. They have broad authority to establish rates for service, prescribe service standards, review and approve rules and regulations and, in most instances, they must approve long-term financing programs prior to their completion. The jurisdiction exercised by each commission is prescribed by state legislation and therefore varies from state to state. The commissioners in Arizona and Tennessee are elected by the voters in those states. In Virginia, members of the Corporation Commission are elected by a joint vote of the two houses of the General Assembly. All other state commissioners regulating subsidiaries are appointed by the governors of the respective states and usually require approval by the state legislature. Commissions range in size from three to seven members. The background of the individuals serving in these important positions covers a broad spectrum. Economic regulation deals with many competing, if not conflicting, public pressures. Rate adjustments normally are initiated by the regulated entity. Public hearings, which are basically financial fact-finding sessions, are conducted. The purpose of this process is to set rates for service which assure the financial viability of the regulated entity while insuring customers high quality service at reasonable cost. A rate case focuses on four areas: o The amount of investment in facilities which provide public service o The capital costs for the funds used to build the facilities which serve the public o The operating cost associated with providing that service o The tariff design which allocates revenue requirements equitably across the customer base Prudent management dictates that a water utility anticipate the time required for the regulatory process and file for rate adjustments which will reflect the cost of providing service at the time the authorized rates become effective. Requests that regulators address single issue cost increases as they occur have met with limited success. Recovery of such costs is therefore normally delayed by the time required to move through the full regulatory process. The regulated subsidiaries aggressively pursue various methods of offsetting the adverse financial impact of regulatory lag. Several subsidiaries now recover in rates a return on plant before it is in service instead of capitalizing an allowance for funds during construction. Certain subsidiaries have also received rate orders allowing recovery of interest and depreciation expense related to the period of time from when a major construction project was placed in service until new rates reflecting the cost of the project went into effect. American Water Works and subsidiary companies personnel participate in regulatory conferences and meetings, including those conducted by regional regulatory associations. Our goal in this effort is to increase understanding of the industry and its unique regulatory requirements. The company appreciates the thoughtful work of the Water Committee of the National Association of Regulatory Utility Commissioners. Its initiatives and the growing public awareness of the importance of adequate water supply have led to progressive regulation which has allowed utility subsidiaries to address, on a timely basis, water supply issues which otherwise would still be unresolved. 71 (Page 35 of the 1994 Annual Report) American Water Works Company, Inc., and Subsidiary Companies REPORT OF INDEPENDENT ACCOUNTANTS TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF AMERICAN WATER WORKS COMPANY, INC. In our opinion, the accompanying consolidated balance sheet and consolidated statement of capitalization and the related consolidated statements of income and retained earnings, of cash flows and of common stockholders' equity of American Water Works Company, Inc. and Subsidiary Companies and the accompanying balance sheet and the related statements of income and retained earnings and of cash flows of American Water Works Company, Inc., present fairly, in all material respects, the consolidated financial position of American Water Works Company, Inc. and Subsidiary Companies and the financial position of American Water Works Company, Inc. at December 31, 1994 and 1993, and the consolidated results of operations and cash flows of American Water Works Company, Inc. and Subsidiary Companies for each of the three years in the period ended December 31, 1994 and the changes in consolidated common stockholders' equity of American Water Works Company, Inc. and Subsidiary Companies for each of the five years in the period ended December 31, 1994 and the results of operations and cash flows of American Water Works Company, Inc. for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Note 4 to the Financial Statements, effective January 1, 1993 the company changed its method of accounting for postretirement benefits other than pensions. PRICE WATERHOUSE LLP Thirty South Seventeenth Street Philadelphia, Pennsylvania January 31, 1995 72 (Page 36 of the 1994 Annual Report) CONSOLIDATED BALANCE SHEET (In thousands)
At December 31, 1994 1993 ===================================================================================================================== ASSETS Property, plant and equipment Utility plant -- at original cost less accumulated depreciation $2,645,079 $2,444,277 Utility plant acquisition adjustments 39,212 40,689 Other utility plant adjustments 196 246 Nonutility property, net of accumulated depreciation 18,951 21,224 Excess of cost of investments in subsidiaries over book equity at acquisition 22,681 22,709 - --------------------------------------------------------------------------------------------------------------------- 2,726,119 2,529,145 - --------------------------------------------------------------------------------------------------------------------- Current assets Cash and cash equivalents 30,091 52,979 Temporary investments -- at cost plus accrued interest 1,448 399 Customer accounts receivable 50,375 46,795 Allowance for uncollectible accounts (999) (1,107) Unbilled revenues 57,687 57,298 Miscellaneous receivables 5,342 7,033 Materials and supplies 9,846 8,965 Deferred vacation pay 9,256 8,517 Other 7,531 8,776 - --------------------------------------------------------------------------------------------------------------------- 170,577 189,655 - --------------------------------------------------------------------------------------------------------------------- Regulatory and other long-term assets Regulatory asset -- income taxes recoverable through rates 202,967 198,744 Funds restricted for construction 26,213 5,899 Debt and preferred stock expense 18,882 15,552 Deferred pension expense 17,931 13,437 Deferred postretirement benefit expense 8,545 7,563 Tank painting costs 8,997 7,906 Other 26,423 26,110 - --------------------------------------------------------------------------------------------------------------------- 309,958 275,211 - --------------------------------------------------------------------------------------------------------------------- $3,206,654 $2,994,011 =================================
73 (Page 37 of the 1994 Annual Report) American Water Works Company, Inc., and Subsidiary Companies
1994 1993 =============================================================================================================== CAPITALIZATION AND LIABILITIES Capitalization Common stockholders' equity $ 733,440 $ 655,275 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 43,737 46,515 Preferred stocks of subsidiaries without mandatory redemption requirements 6,288 6,302 Long-term debt American Water Works Company, Inc. 131,000 131,000 Subsidiaries 1,177,043 1,056,404 - --------------------------------------------------------------------------------------------------------------- 2,143,181 1,947,169 - --------------------------------------------------------------------------------------------------------------- Current liabilities Bank debt 82,425 193,620 Current portion of long-term debt 73,929 5,405 Accounts payable 43,629 31,644 Taxes accrued, including federal income 13,352 11,798 Interest accrued 26,296 23,226 Accrued vacation pay 9,575 8,835 Other 27,587 27,852 - --------------------------------------------------------------------------------------------------------------- 276,793 302,380 - --------------------------------------------------------------------------------------------------------------- Regulatory and other long-term liabilities Advances for construction 130,617 125,031 Deferred income taxes 331,889 309,204 Regulatory liability -- income taxes refundable through rates 42,946 45,942 Deferred investment tax credits 39,702 41,644 Accrued pension expense 29,121 23,903 Accrued postretirement benefit expense 9,100 9,100 Other 4,902 5,143 - --------------------------------------------------------------------------------------------------------------- 588,277 559,967 - --------------------------------------------------------------------------------------------------------------- Contributions in aid of construction 198,403 184,495 - --------------------------------------------------------------------------------------------------------------- Commitments and contingencies - --------------------------------------------------------------------------------------------------------------- $3,206,654 $2,994,011 =================================
The accompanying notes are an integral part of these financial statements. 74 (Page 38 of the 1994 Annual Report) American Water Works Company, Inc., and Subsidiary Companies CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS (In thousands, except per share amounts)
For the years ended December 31, 1994 1993 1992 ========================================================================================== CONSOLIDATED INCOME Operating revenues $770,241 $717,537 $657,360 - ------------------------------------------------------------------------------------------ Operating expenses Operation and maintenance 391,539 362,451 333,212 Depreciation and amortization 72,892 66,838 58,382 General taxes 73,085 67,917 63,612 State income taxes 7,718 7,375 6,246 Federal income taxes 42,194 40,489 31,415 - ------------------------------------------------------------------------------------------ 587,428 545,070 492,867 - ------------------------------------------------------------------------------------------ Operating income 182,813 172,467 164,493 Allowance for other funds used during construction 5,890 3,757 2,711 Other income 2,383 1,609 715 - ------------------------------------------------------------------------------------------ 191,086 177,833 167,919 - ------------------------------------------------------------------------------------------ Income deductions Interest 110,088 97,235 96,368 Allowance for borrowed funds used during construction (4,570) (3,087) (3,718) Amortization of debt expense 1,229 1,563 1,044 Preferred dividends of subsidiaries 3,814 4,361 4,631 Other deductions 1,873 2,374 1,434 - ------------------------------------------------------------------------------------------ 112,434 102,446 99,759 - ------------------------------------------------------------------------------------------ Net income 78,652 75,387 68,160 Dividends on preferred stocks 3,984 3,996 4,019 - ------------------------------------------------------------------------------------------ Net income to common stock $ 74,668 $ 71,391 $ 64,141 ============================== Average shares of common stock outstanding 31,918 31,139 30,943 Earnings per common share on average shares outstanding $ 2.34 $ 2.29 $ 2.07 ============================== CONSOLIDATED RETAINED EARNINGS Balance at beginning of year $578,593 $538,332 $502,800 Add: net income 78,652 75,387 68,160 - ------------------------------------------------------------------------------------------ 657,245 613,719 570,960 - ------------------------------------------------------------------------------------------ Deduct: dividends Preferred stock 3,528 3,540 3,563 Preference stock 456 456 456 Common stock -- $1.08 per share in 1994, $1.00 per share in 1993, $.925 per share in 1992 34,386 31,130 28,609 - ------------------------------------------------------------------------------------------ 38,370 35,126 32,628 - ------------------------------------------------------------------------------------------ Balance at end of year $618,875 $578,593 $538,332 ==============================
The accompanying notes are an integral part of these financial statements. 75 (Page 39 of the 1994 Annual Report) American Water Works Company, Inc., and Subsidiary Companies CONSOLIDATED STATEMENT OF CASH FLOWS (In thousands)
For the years ended December 31, 1994 1993 1992 ========================================================================================================= CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 78,652 $ 75,387 $ 68,160 Adjustments Depreciation and amortization 72,892 66,838 58,382 Provision for deferred income taxes 17,482 7,873 13,042 Provision for losses on accounts receivable 3,762 3,377 3,580 Allowance for other funds used during construction (5,890) (3,757) (2,711) Employee benefit expenses greater (less) than funding (1,999) 2,567 1,450 Common stock contributions to employee benefit plans 2,310 1,581 1,316 Deferred revenues, net 138 (398) 2,426 Deferred tank painting costs (2,308) (1,653) (1,539) Deferred rate case expense (2,171) (3,008) (3,040) Deferred extraordinary weather costs (1,248) -- -- Amortization of deferred charges 7,726 8,268 6,270 Other, net (2,562) (1,873) (19) Changes in assets and liabilities, net of effects from acquisitions Accounts receivable (5,759) (9,734) (2,308) Unbilled revenues (389) (3,738) 229 Other current assets 364 (352) (598) Accounts payable 11,985 2,987 (1,568) Taxes accrued, including federal income 1,554 (664) 2,958 Interest accrued 3,070 (674) (3,417) Other current liabilities (265) (3,257) (34) - --------------------------------------------------------------------------------------------------------- Net cash from operating activities 177,344 139,770 142,579 - --------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Construction expenditures (265,673) (193,116) (197,453) Allowance for other funds used during construction 5,890 3,757 2,711 Water system acquisitions, net of acquired cash (6,011) (65,889) (5,949) Proceeds from the disposition of property, plant and equipment 3,013 2,183 1,616 Removal costs from property, plant and equipment retirements (6,375) (6,201) (5,224) Funds restricted for construction activity (20,314) (700) (5,200) Temporary investments (1,049) (100) 102 - --------------------------------------------------------------------------------------------------------- Net cash used in investing activities (290,519) (260,066) (209,397) - --------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from long-term debt 196,400 267,070 244,900 Proceeds from preferred stock -- 1,000 5,600 Proceeds from common stock 35,037 3,861 3,991 Net borrowings (repayments) under line-of-credit agreements (111,195) 50,535 58,602 Advances and contributions for construction, net of refunds 22,586 20,661 8,535 Debt issuance costs (4,076) (4,718) (5,335) Repayment of long-term debt (7,303) (152,050) (195,113) Redemption of preferred stocks (2,792) (7,071) (2,797) Dividends paid (38,370) (35,126) (32,628) - --------------------------------------------------------------------------------------------------------- Net cash from financing activities 90,287 144,162 85,755 - --------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents (22,888) 23,866 18,937 Cash and cash equivalents at beginning of year 52,979 29,113 10,176 - --------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of year $ 30,091 $ 52,979 $ 29,113 =============================== Cash paid during the year for: Interest, net of capitalized amount $ 108,653 $ 99,433 $ 97,088 =============================== Income taxes $ 34,429 $ 41,880 $ 25,728 ===============================
Common stock issued in lieu of cash in connection with the Employees' Stock Ownership Plan and the Savings Plan for Employees totaled $2,310 in 1994, $1,581 in 1993 and $1,316 in 1992. Capital lease obligations of $66 and $126 were recorded in 1994 and 1992, respectively. The accompanying notes are an integral part of these financial statements. 76 (Page 40 of the 1994 Annual Report) CONSOLIDATED STATEMENT OF CAPITALIZATION (In thousands, except share and per share amounts)
At December 31, 1994 1993 ================================================================================================================== COMMON STOCKHOLDERS' EQUITY: Common stock -- $1.25 par value, authorized 100,000,000 shares, outstanding 32,659,187 shares in 1994 and 31,243,743 shares in 1993 $ 40,824 $ 39,055 Paid-in capital 76,003 37,627 Retained earnings 618,875 578,593 Unearned compensation (2,262) -- - ------------------------------------------------------------------------------------------------------------------ 733,440 655,275 - ------------------------------------------------------------------------------------------------------------------ At December 31, 1994, common shares reserved for issuance in connection with the company's stock plans were 30,461,581 shares for the Stockholder Rights Plan, 375,643 shares for the Dividend Reinvestment and Stock Purchase Plan, 612,214 shares for the Employees' Stock Ownership Plan, 389,537 shares for the Savings Plan for Employees and 350,000 shares for the Long-Term Performance-Based Incentive Plan. PREFERRED STOCKS WITH MANDATORY REDEMPTION REQUIREMENTS: Cumulative preferred stock -- $25 par value, authorized 1,770,000 shares 8.50% series (non-voting), outstanding 1,600,000 shares, due for redemption on December 1, 2000 40,000 40,000 - ---------------------------------------------------------------------------------------------------------------- The Company redeemed the remaining shares of the 4.90% series preferred stock by making sinking fund payments in the amount of $480 in 1993 and $480 in 1992. PREFERRED STOCKS WITHOUT MANDATORY REDEMPTION REQUIREMENTS: Cumulative preferred stock -- $25 par value 5% series, outstanding 101,777 shares 2,544 2,544 Cumulative preference stock -- $25 par value, authorized 750,000 shares 5% series (non-voting), outstanding 365,158 shares 9,129 9,129 - ---------------------------------------------------------------------------------------------------------------- 11,673 11,673 - ---------------------------------------------------------------------------------------------------------------- PREFERRED STOCKS OF SUBSIDIARIES: Dividend rate 3.9% to less than 5% 8,052 8,621 5% to less than 6% 5,866 6,012 6% to less than 7% 2,479 2,673 7% to less than 8% 2,420 2,470 8% to less than 9% 24,940 24,973 9% to less than 10% 5,188 5,406 10% to less than 11% 980 1,320 11% to less than 12% -- 1,142 12% to less than 13% 100 200 - ---------------------------------------------------------------------------------------------------------------- 50,025 52,817 - ----------------------------------------------------------------------------------------------------------------
Preferred stock agreements of certain subsidiaries require annual sinking fund payments in varying amounts and permit redemption at various prices at the option of the subsidiaries on thirty days' notice, or, in the event of involuntary liquidation, at par value plus accrued dividends. Sinking fund payments for the next five years will amount to $1,411 in 1995, $1,266 in 1996, $1,171 in 1997, $1,165 in 1998 and $933 in 1999. The subsidiaries issued preferred stock with a value of $1,000 in 1993 and $5,600 in 1992. Redemptions of preferred stock amounted to $2,792 in 1994, $6,591 in 1993 and $2,317 in 1992. 77 (Page 41 of the 1994 Annual Report) American Water Works Company, Inc., and Subsidiary Companies
1994 1993 ================================================================================ LONG-TERM DEBT OF AMERICAN WATER WORKS COMPANY, INC.: 8.91% Series B-1 debentures, due December 1, 1996 $ 15,000 $ 15,000 9.06% Series B-2 debentures, due December 1, 1999 35,000 35,000 7.41% Series C debentures, due May 1, 2003 81,000 81,000 - -------------------------------------------------------------------------------- 131,000 131,000 - --------------------------------------------------------------------------------
Capital lease obligations to a subsidiary were $51 in 1994 and $58 in 1993.
LONG-TERM DEBT OF SUBSIDIARIES: Current Interest Rate Maturities - -------------------------------------------------------------------------------- 4% to less than 5% 36 363 399 5% to less than 6% 41 113,151 77,717 6% to less than 7% 9 229,140 142,349 7% to less than 8% 33 240,212 165,945 8% to less than 9% 41 196,589 198,809 9% to less than 10% 20,095 327,525 347,440 10% to less than 11% 16,855 65,680 82,535 11% to less than 12% 14,500 -- 14,500 12% to less than 13% 11,800 -- 11,800 13% to less than 14% 10,150 2,002 12,152 14% to less than 15% 50 750 800 - -------------------------------------------------------------------------------- 73,610 1,175,412 1,054,446 Capital leases 319 1,631 1,958 - -------------------------------------------------------------------------------- 73,929 1,177,043 1,056,404 - -------------------------------------------------------------------------------- $2,143,181 $1,947,169 ========================
Maturities of long-term debt, including sinking fund requirements, during the next five years will amount to $73,929 in 1995, $33,605 in 1996, $55,911 in 1997, $22,260 in 1998 and $15,094 in 1999. Long-term debt of subsidiaries is substantially secured by utility plant. The accompanying notes are an integral part of these financial statements. 78 (Page 42 of the 1994 Annual Report) American Water Works Company, Inc., and Subsidiary Companies CONSOLIDATED STATEMENT OF COMMON SHAREHOLDERS' EQUITY (Dollars in thousands, except per share amounts)
Common Stock Common --------------------- Paid-in Retained Unearned Stockholders' Shares Par Value Capital Earnings Compensation Equity ================================================================================================================ BALANCE AT DECEMBER 31, 1989 30,461,581 $38,077 $21,974 $427,356 -- $487,407 Net income -- -- -- 57,088 -- 57,088 Dividend reinvestment 69,762 87 907 -- -- 994 Employees' stock ownership plan 86,600 108 1,306 -- -- 1,414 Dividends: Preferred stocks -- -- -- (690) -- (690) Common stock, $.80 per share -- -- -- (24,421) -- (24,421) - ---------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1990 30,617,943 38,272 24,187 459,333 521,792 Net income -- -- -- 73,593 -- 73,593 Dividend reinvestment 72,639 91 1,361 -- -- 1,452 Employees' stock ownership plan 103,254 129 1,893 -- -- 2,022 Dividends: Preferred stocks -- -- -- (3,703) -- (3,703) Common stock, $.86 per share -- -- -- (26,423) -- (26,423) - ---------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1991 30,793,836 38,492 27,441 502,800 -- 568,733 Net income -- -- -- 68,160 -- 68,160 Dividend reinvestment 137,635 172 2,838 -- -- 3,010 Employees' stock ownership plan 103,612 130 2,167 -- -- 2,297 Dividends: Preferred stocks -- -- -- (4,019) -- (4,019) Common stock, $.925 per share -- -- -- (28,609) -- (28,609) - ---------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1992 31,035,083 38,794 32,446 538,332 -- 609,572 Net income -- -- -- 75,387 -- 75,387 Dividend reinvestment 78,932 99 1,956 -- -- 2,055 Stock purchase 21,599 27 355 -- -- 382 Employees' stock ownership plan 86,966 109 2,250 -- -- 2,359 Savings plan for employees 21,163 26 620 -- -- 646 Dividends: Preferred stocks -- -- -- (3,996) -- (3,996) Common stock, $1.00 per share -- -- -- (31,130) -- (31,130) - ---------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1993 31,243,743 39,055 37,627 578,593 -- 655,275 Net income -- -- -- 78,652 -- 78,652 Dividend reinvestment 151,254 189 3,910 -- -- 4,099 Stock purchase 1,092,536 1,365 26,993 -- -- 28,358 Employees' stock ownership plan 82,354 103 2,283 -- -- 2,386 Savings plan for employees 89,300 112 2,392 -- -- 2,504 Long-term performance-based incentive plan -- -- 2,798 -- (2,262) 536 Dividends: Preferred stocks -- -- -- (3,984) -- (3,984) Common stock, $1.08 per share -- -- -- (34,386) -- (34,386) - ---------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1994 32,659,187 $40,824 $76,003 $618,875 $(2,262) $733,440 ==========================================================================
The accompanying notes are an integral part of these financial statements. 79 (Page 43 of the 1994 Annual Report) American Water Works Company, Inc. BALANCE SHEET (In thousands)
At December 31, 1994 1993 ========================================================================================= ASSETS Investments in subsidiaries Securities $898,219 $810,372 Notes and advances 120 3,630 - ----------------------------------------------------------------------------------------- 898,339 814,002 - ----------------------------------------------------------------------------------------- Current assets Cash and cash equivalents 17,647 23,302 Notes receivable from subsidiaries 10 1,010 Other 476 253 - ----------------------------------------------------------------------------------------- 18,133 24,565 - ----------------------------------------------------------------------------------------- Deferred debits Debt expense 346 402 Preferred stock expense 255 278 Other 2,027 1,624 - ----------------------------------------------------------------------------------------- 2,628 2,304 - ----------------------------------------------------------------------------------------- Other long-term assets 5,815 6,103 - ----------------------------------------------------------------------------------------- $924,915 $846,974 ======================== CAPITALIZATION AND LIABILITIES Capitalization Common stockholders' equity $733,440 $655,275 Preferred stocks with mandatory redemption requirements 40,000 40,000 Preferred stocks without mandatory redemption requirements 11,673 11,673 Long-term debt 131,051 131,058 - ----------------------------------------------------------------------------------------- 916,164 838,006 - ----------------------------------------------------------------------------------------- Current liabilities Current portion of long-term debt 20 16 Taxes accrued, including federal income 53 548 Interest accrued 1,414 1,378 Other 750 856 - ----------------------------------------------------------------------------------------- 2,237 2,798 - ----------------------------------------------------------------------------------------- Other long-term liabilities 6,514 6,170 - ----------------------------------------------------------------------------------------- Commitments and contingencies - ----------------------------------------------------------------------------------------- $924,915 $846,974 ========================
The accompanying notes are an integral part of these financial statements. 80 (Page 44 of the 1994 Annual Report) American Water Works Company, Inc. STATEMENTS OF INCOME AND RETAINED EARNINGS (In thousands, except per share amounts)
For the years ended December 31, 1994 1993 1992 ========================================================================================== INCOME Income from subsidiaries Equity in earnings of subsidiaries Dividends $ 64,917 $ 65,264 $ 55,859 Undistributed earnings 24,532 18,984 19,401 - ------------------------------------------------------------------------------------------ 89,449 84,248 75,260 Interest 154 352 804 Other income 510 868 304 - ------------------------------------------------------------------------------------------ 90,113 85,468 76,368 - ------------------------------------------------------------------------------------------ Expenses and taxes Operating and administrative expenses 6,897 5,438 4,335 General taxes 232 200 200 Federal income taxes (6,366) (5,228) (3,989) Interest 10,642 9,618 7,629 Amortization of debt expense 56 53 33 - ------------------------------------------------------------------------------------------ 11,461 10,081 8,208 - ------------------------------------------------------------------------------------------ Net income 78,652 75,387 68,160 Dividends on preferred stocks 3,984 3,996 4,019 - ------------------------------------------------------------------------------------------ Net income to common stock $ 74,668 $ 71,391 $ 64,141 ============================== Average shares of common stock outstanding 31,918 31,139 30,943 Earnings per common share on average shares outstanding $ 2.34 $ 2.29 $ 2.07 ============================== RETAINED EARNINGS Balance at beginning of year $578,593 $538,332 $502,800 Add: net income 78,652 75,387 68,160 - ------------------------------------------------------------------------------------------ 657,245 613,719 570,960 - ------------------------------------------------------------------------------------------ Deduct: dividends Preferred stock 3,528 3,540 3,563 Preference stock 456 456 456 Common stock -- $1.08 per share in 1994, $1.00 per share in 1993, $.925 per share in 1992 34,386 31,130 28,609 - ------------------------------------------------------------------------------------------ 38,370 35,126 32,628 ------------------------------ Balance at end of year $618,875 $578,593 $538,332 ==============================
The accompanying notes are an integral part of these financial statements. 81 (Page 45 of the 1994 Annual Report) American Water Works Company, Inc. STATEMENT OF CASH FLOWS (In thousands)
For the years ended December 31, 1994 1993 1992 ============================================================================================== CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 78,652 $ 75,387 $ 68,160 Adjustments Undistributed earnings of subsidiaries (24,532) (18,984) (19,401) Other, net 1,558 739 605 Changes in assets and liabilities Other current assets (223) 184 (180) Taxes accrued, including federal income (495) 704 109 Interest accrued 36 493 26 Other current liabilities (106) 117 46 - ---------------------------------------------------------------------------------------------- Net cash from operating activities 54,890 58,640 49,365 - ---------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Investment in subsidiaries' common stock (63,315) (42,875) (36,800) Redemption of preferred stock by subsidiary -- 1,000 -- Repayment of promissory notes by subsidiaries 4,510 1,010 5,210 Other (684) (594) -- - ---------------------------------------------------------------------------------------------- Net cash used in investing activities (59,489) (41,459) (31,590) - ---------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from long-term debt -- 81,000 -- Proceeds from common stock 37,347 5,442 5,307 Net borrowings (repayments) under line-of-credit agreements -- (21,255) 11,425 Repayment of long-term debt (15) (23,214) (1,317) Redemption of preferred stock -- (480) (480) Dividends paid (38,370) (35,126) (32,628) Other (18) (324) (19) - ---------------------------------------------------------------------------------------------- Net cash from (used in) financing activities (1,056) 6,043 (17,712) - ---------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents (5,655) 23,224 63 Cash and cash equivalents at beginning of year 23,302 78 15 - ---------------------------------------------------------------------------------------------- Cash and cash equivalents at end of year $ 17,647 $ 23,302 $ 78 ============================== Cash paid (received) during the year for: Interest $ 10,606 $ 9,125 $ 7,603 ============================== Income taxes $ (5,848) $ (4,846) $ (3,870) ==============================
The accompanying notes are an integral part of these financial statements. 82 (Page 46 of the 1994 Annual Report) NOTES TO FINANCIAL STATEMENTS NOTE 1: SIGNIFICANT ACCOUNTING POLICIES The accounting policies of the regulated subsidiaries are in conformity with generally accepted accounting principles for regulated public utilities and accounting procedures prescribed by regulatory authorities of the respective states in which they operate. Certain reclassifications have been made to conform previously reported data to the current presentation. Principles of Consolidation The consolidated financial statements include the accounts of the parent company and all subsidiaries. All intercompany accounts and transactions are eliminated. Parent company financial statements reflect the equity method of accounting for investments in common stock of subsidiaries (cost plus equity in subsidiaries' undistributed earnings since acquisition). Property, Plant and Equipment The cost of additions to utility plant and replacement of retirement units of property is capitalized. Cost includes material, direct labor and such indirect items as engineering and supervision, payroll taxes and benefits, transportation and an allowance for funds used during construction. Repairs, maintenance and minor replacements of property are charged to current operations. The cost of property units retired in the ordinary course of business plus removal cost (less salvage) is charged to accumulated depreciation. The cost of property, plant and equipment is depreciated using the straight-line method over the estimated service lives of the assets. Utility plant acquisition adjustments and other utility plant adjustments are being amortized principally over 40 years. Intangible Assets The excess of cost of investments in subsidiaries over book equity at acquisition, which relates primarily to acquisitions prior to October 31, 1970, is not being amortized because in the opinion of management there has been no diminution in value. Cash and Cash Equivalents Substantially all of the company's cash is invested in interest bearing accounts. The company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents consist primarily of investment grade commercial paper, bank certificates of deposit and United States Government securities. Cash equivalents are stated at cost plus accrued interest. Materials and Supplies Materials and supplies are stated at average cost. Regulatory and Other Long-Term Assets In accordance with Statement of Financial Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income Taxes," the company has recorded a regulatory asset for the additional revenues expected to be realized as the tax effects of temporary differences previously flowed through to customers reverse. These temporary differences are primarily related to the depreciation of property acquired before the adoption of full normalization for rate making purposes by regulatory authorities. Pension expense is deferred by certain subsidiaries when it is probable such costs will be recovered in future water service rates as contributions are made to the pension plan. The company adopted Statement of Financial Accounting Standards No. 106 (SFAS No. 106), "Employers' Accounting for Postretirement Benefits Other Than Pensions," effective January 1, 1993. Postretirement benefit expense in excess of the amount recovered in rates is deferred by certain subsidiaries when it is probable that recovery of such costs will be included in rates within approximately five years from the date of adoption of SFAS No. 106, and the combined deferral recovery period will not exceed approximately 20 years. Debt expense is amortized over the lives of the respective issues. Call premiums on the redemption of long-term debt, as well as unamortized debt expense, are deferred and amortized to the extent they will be recovered through future water service rates. Expenses of preferred stock issues without sinking fund provisions are amortized over 30 years from date of issue; expenses of issues with sinking fund provisions are charged to operations as shares are retired. 83 (Page 47 of the 1994 Annual Report) American Water Works Company, Inc., and Subsidiary Companies Tank painting costs included in regulatory assets are generally being amortized on a straight-line basis over periods ranging from 4 to 20 years as permitted by the regulatory authorities. Other Current Liabilities Other current liabilities at December 31, 1994 and 1993 include payables to banks of $7,009,000 and $5,308,000, respectively, which represent checks issued but not presented to the banks for payment, net of the related bank balance. Regulatory and Other Long-Term Liabilities In accordance with SFAS No. 109, the company has recorded a regulatory liability for the net reduction expected in future revenues as deferred taxes previously provided, attributable to the difference between the state and federal income tax rates under prior law and the current statutory rates, reverse over the average remaining service lives of the related assets. Advances and Contributions in Aid of Construction Regulated subsidiaries may receive advances and contributions to fund construction necessary to extend service to new areas. As determined by regulatory authorities, advances for construction are refundable for limited periods of time as new customers begin to receive service. Amounts which are no longer refundable are reclassified to contributions in aid of construction. Utility plant funded by advances and contributions is excluded from rate base and is generally not depreciated for rate making purposes. Advances and contributions received subsequent to 1986 must be included in taxable income and the related property is depreciable for tax purposes. Recognition of Revenues Water service revenues for financial reporting purposes include amounts billed to customers on a cycle basis and unbilled amounts based on estimated usage from the date of the latest meter reading to the end of the accounting period. Income Taxes The company and its subsidiaries participate in a consolidated federal income tax return. For the company and each of its subsidiaries, federal income tax expense for financial reporting purposes is provided on a separate return basis, except that the federal income tax rate applicable to the consolidated group is applied to separate company taxable income and the benefit of net operating losses, principally at the parent company level, is recognized currently. Certain income and expense items are accounted for in different time periods for financial reporting than for income tax reporting purposes. Deferred income taxes have been provided in accordance with SFAS No. 109 on the difference between the tax bases of assets and liabilities and the amounts at which they are carried in the financial statements. These deferred income taxes are based on the enacted tax rates to be in effect when such temporary differences are expected to reverse. This has the effect of grossing-up these assets and liabilities to a revenue requirements level. The regulated subsidiaries are also required to recognize regulatory assets and liabilities for the effect on revenues expected to be realized as the tax effects of temporary differences previously flowed through to customers reverse. Investment tax credits have been deferred and are being amortized to income over the average estimated services lives of the related assets. Allowance for Funds Used During Construction (AFUDC) AFUDC is a non-cash credit to income with a corresponding charge to utility plant which represents the cost of borrowed funds and a return on equity funds utilized to fund plant under construction. The regulated subsidiaries record AFUDC to the extent permitted by regulatory authorities. NOTE 2: INCOME TAXES Effective January 1, 1993, the company adopted, on a prospective basis, SFAS No. 109. The Statement requires deferred income taxes to be provided on the difference between the tax bases of assets and liabilities and the amounts at which they are carried in the financial statements, based on the enacted tax rates to be in effect when such temporary differences are expected to reverse. SFAS No. 109 requires regulated enterprises to provide deferred taxes on all temporary differences including those not previously recognized when the tax effects of the difference are, at the direction of regulatory authorities, flowed through to customers. Regulated enterprises are also required to recognize regulatory assets and liabilities for the effect on revenues expected to be realized as the tax effects of temporary differences previously flowed through to customers reverse. 84 (Page 48 of the 1994 Annual Report) NOTES TO FINANCIAL STATEMENTS As a result of the adoption of SFAS 109, the company and its subsidiaries recorded additional assets and liabilities of approximately $210,000,000. The company's consolidated results of operations were not materially impacted by the adoption of SFAS No. 109. The effect of adopting SFAS No. 109 was not material to the financial position or results of operations of the parent company. The Revenue Reconciliation Act of 1993 increased the company's federal income tax rate, retroactively to January 1, 1993, from 34% to 35%. The increased tax rate also resulted in an increase in the company's net deferred income tax liability, as well as increases in tax-related regulatory assets and liabilities which are recorded at revenue requirement levels in accordance with SFAS No. 109. Where recovery of the increase in deferred income taxes is expected from regulatory authorities, regulated subsidiaries have recorded a regulatory asset. As a result, the company recorded additional assets and liabilities of approximately $5,500,000. During 1993, federal income tax expense was adjusted to reflect the 1% increase in the tax rate, resulting in a reduction in the company's results of operations for 1993 of approximately $1,200,000. As of December 31, 1994, the company and its subsidiaries had a net non-current deferred tax liability of $331,889,000. Non-current deferred tax liabilities of $491,154,000 were offset by total non-current deferred tax assets of $159,265,000. Of the company's net non-current deferred tax liability, $266,000,000 was attributed to property, plant, and equipment basis differences and depreciation methods, $69,000,000 was attributed to income taxes recoverable in future rates and $(3,000,000) related to the net of all other types of temporary differences. As of December 31, 1993, the company and its subsidiaries had a net non-current deferred tax liability of $309,204,000. Non-current deferred tax liabilities of $452,428,000 were offset by total non-current deferred tax assets of $143,224,000. Of the company's net non-current deferred tax liability, $243,000,000 was attributed to property, plant, and equipment basis differences and depreciation methods, $71,000,000 was attributed to income taxes recoverable in future rates and $(5,000,000) related to the net of all other types of temporary differences. As of December 31, 1994 and 1993, the parent company had no material temporary differences. No valuation allowances were required on deferred tax assets at December 31, 1994 and 1993. Components of consolidated income tax expense for the years presented in the consolidated statement of income are as follows (in thousands):
1994 1993 1992 ============================================================================== STATE INCOME TAXES: Current $ 7,399 $ 8,681 $ 5,575 Deferred Current 97 (57) -- Non-current 222 (1,249) 671 - ------------------------------------------------------------------------------ $ 7,718 $ 7,375 $ 6,246 ============================== FEDERAL INCOME TAXES: Current $ 24,930 $ 31,162 $ 19,111 Deferred Current 4 (92) (67) Non-current 18,511 10,640 13,526 Amortization of deferred investment tax credits (1,251) (1,221) (1,155) - ------------------------------------------------------------------------------ $ 42,194 $ 40,489 $ 31,415 ==============================
Following is a reconciliation of federal income tax expense to income tax at the statutory rate (in thousands):
1994 1993 1992 ============================================================================== Income before federal income tax $120,846 $115,876 $ 99,575 ============================== Income tax at federal statutory rate -- 35% in 1994 and 1993; 34% in 1992 $ 42,296 $ 40,557 $ 33,856 Increases (decreases) resulting from -- Flow through differences 874 1,494 (1,683) Investment tax credits (1,251) (1,221) (1,155) Subsidiary preferred dividends 1,297 1,486 1,533 Other (1,022) (1,827) (1,136) - ------------------------------------------------------------------------------ Federal income tax expense $ 42,194 $ 40,489 $ 31,415 ==============================
NOTE 3: COMPENSATING BALANCES AND BANK DEBT The company and its subsidiaries maintain lines of credit with various banks. The total of the unused lines of credit at December 31, 1994 was $11,000,000 for the company and $89,294,000 for the subsidiaries. Borrowings under such lines of credit generally are payable on demand and bear interest at variable rates. None of the agreements with lending banks has compensating balance requirements. 85 (Page 49 of the 1994 Annual Report) American Water Works Company, Inc., and Subsidiary Companies Short-term bank borrowing information is as follows (in thousands):
1994 1993 1992 ============================================================================== Maximum amount outstanding $195,727 $220,150 $133,816 Average amount outstanding 123,545 171,340 84,210 Weighted average annual interest rate 4.60% 3.82% 4.56% Interest rate at December 31 4.84% 3.71% 3.26%
NOTE 4: POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS Pension Benefits The company and its subsidiaries have a noncontributory defined benefit pension plan covering substantially all employees. Benefits under the plan are based on the employee's years of service and average annual compensation in the last five years of employment. The following table provides pension cost components and the expected long-term rate of return on plan assets used in determining net pension cost (in thousands):
1994 1993 1992 ============================================================================== Service cost-benefits earned during the year $ 10,240 $ 8,659 $ 9,071 Interest cost on projected benefit obligation 24,360 21,989 21,455 Actual return on plan assets (9,383) (23,620) (18,484) Net amortization and deferral (15,472) (1,595) (6,016) - ------------------------------------------------------------------------------ Net pension cost $ 9,745 $ 5,433 $ 6,026 ============================== Assumed asset earnings rate 8.50% 8.75% 8.75%
The company's funding policy is to contribute at least the minimum amount required by the Employee Retirement Income Security Act of 1974. The company contributed $4,750,000 to the plan in 1994. There were no contributions made in 1993 or 1992 due to the funded status of the plan. Pension plan assets are invested in a number of investments including a guaranteed interest contract with a major insurance company, equity mutual funds, United States Government securities and publicly traded bonds. The following table reconciles plan assets and liabilities to the funded status of the plan at December 31 (in thousands):
1994 1993 ============================================================================== Plan assets at fair value $285,641 $283,772 =================== Actuarial present value of benefit obligations: Vested benefits $226,293 $252,289 Non-vested benefits 5,930 6,259 - ------------------------------------------------------------------------------ Accumulated benefit obligation 232,223 258,548 Effect of projected future salary increases 58,059 73,427 - ------------------------------------------------------------------------------ Total projected benefit obligation $290,282 $331,975 =================== Projected benefit obligation in excess of plan assets $ (4,641) $(48,203) Unrecognized net transition asset (18,821) (21,173) Unrecognized prior service cost 1,003 1,653 Unrecognized net (gain) loss (562) 49,696 - ------------------------------------------------------------------------------ Accrued pension cost $(23,021) $(18,027) =================== Discount rate assumption 8.75% 7.25% Compensation growth rate assumption 5.00% 5.00%
The company also has two unfunded supplemental non-qualified pension plans that provide additional retirement benefits to certain employees of the company and its subsidiaries. Pension costs for the supplemental plans were $1,344,000 for 1994, $1,066,000 for 1993 and $1,017,000 for 1992. At December 31, 1994, the projected benefit obligation for these plans totaled $8,377,000. Accrued as a pension liability on the balance sheet is $6,100,000 representing $5,375,000 of accrued pension cost and an unfunded accumulated benefit obligation in excess of accrued pension cost of $725,000. Postretirement Benefits Other Than Pensions The company and its subsidiaries provide certain life insurance benefits for retired employees and certain health care benefits for retired employees and their dependents. Substantially all employees may become eligible for those benefits if they reach retirement age while still working for the company. The program provides for monthly contributions from post-1990 retirees and their dependents under age 65 who elect a basic/major medical plan that covers 100% of hospital and surgical expenses. A comprehensive medical plan, with certain limitations on benefits, that does not require contributions from retirees is also available. Both plans contain cost-sharing features such as deductibles and coinsurance, and require additional monthly contributions for early retirements that took place after July 31, 1993. 86 (Page 50 of the 1994 Annual Report) NOTES TO FINANCIAL STATEMENTS In the first quarter of 1993, the company adopted SFAS No. 106 which requires the company to accrue the expected cost of providing postretirement health care and life insurance benefits as employees render the services necessary to earn the benefits, in a manner similar to that used to account for pensions. The effect of adopting the new accounting method increased postretirement benefit costs in 1993 by $16,459,000, of which $6,649,000 was deferred because future recovery in rates is probable and $1,031,000 was capitalized to utility plant. The regulated subsidiaries recovered approximately $5,178,000 of these increased costs in rates during 1993. This change in accounting decreased net income for 1993 by $2,207,000, or $.07 per share, after giving effect to the additional amounts recovered in rates. The company's regulated subsidiaries have been pursuing recovery, in rates, the additional costs resulting from this change in accounting. As of December 31, 1994, 17 regulatory authorities have permitted such recovery currently or indicated that recovery of these costs will be included in rates within approximately five years from the date of adoption of SFAS No. 106 with the combined deferral recovery period not exceeding approximately 20 years. Two regulatory authorities have denied recovery in current rates, but will continue to allow recovery when the benefits are paid in the future. The outcome of this issue in the rate making process in one state is presently uncertain. Where recovery is uncertain or has been initially denied, regulated subsidiaries will continue to pursue recovery of the increased costs in rates. Although the expense recognized in 1994 for postretirement health care and life insurance benefits was higher than 1993, net income was not adversely affected due to an offsetting increase in rates. Prior to 1993, the company recognized the cost of providing postretirement benefits by expensing annual insurance premiums as incurred. Such premiums approximated $4,600,000 in 1992. The following table provides postretirement benefit cost components (in thousands):
1994 1993 ============================================================================== Service cost-benefits earned during the year $ 5,759 $ 5,153 Interest cost on accumulated postretirement benefit obligation 10,374 10,100 Actual return on plan assets (975) -- Net amortization and deferral 5,648 6,173 - ------------------------------------------------------------------------------ Net postretirement benefit cost $20,806 $21,426 ================== Assumed asset earnings rate 7.70% 7.70%
The transition obligation of $122,115,000 at January 1, 1993 is being amortized over twenty years. The company made contributions to trust funds established for its postretirement benefit plans of $20,806,000 in 1994 and $8,235,000 in 1993. In subsequent years, the company intends to fund postretirement benefit costs accrued. Plan assets are invested in both a mutual fund comprised of high quality debt securities and a municipal bond money market fund. The following table reconciles the funded status of the plan with the liability included in the consolidated balance sheet at December 31 (in thousands):
1994 1993 ============================================================================== Plan assets at fair value $ 32,142 $ 8,288 =================== Actuarial present value of postretirement benefit obligations: Retirees and dependents $ 53,300 $ 48,731 Fully eligible active plan participants 3,847 4,326 Other active plan participants 73,980 86,662 - ------------------------------------------------------------------------------ Total accumulated postretirement benefit obligation $131,127 $ 139,719 =================== Accumulated postretirement benefit obligation in excess of plan assets $(98,985) $(131,431) Unrecognized transition obligation 109,903 116,009 Unrecognized prior service costs 3,537 3,751 Unrecognized net (gain) loss (23,555) 2,571 - ------------------------------------------------------------------------------ Accrued postretirement benefit cost $ (9,100) $ (9,100) =================== Discount rate assumption 8.75% 7.25% Compensation growth rate assumption 5% 5%
The health care cost trend rate, used to calculate the company's cost for postretirement health care benefits, is an 11% annual rate in 1995 and is assumed to decrease gradually to a 5.5% annual rate for 2004 and remain at that level thereafter. A one-percentage-point increase in the health care cost trend rate would have increased the accumulated postretirement benefit obligation by $16,800,000 at January 1, 1995 and the aggregate of the service and interest cost components of postretirement benefit costs for 1994 by $2,900,000. Postemployment Benefits In the first quarter of 1994, the company adopted Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits." The Statement requires the company to accrue the cost of providing benefits to former and inactive employees after employment, but before retirement. The company's results of operations and financial position were not materially impacted by the adoption of this Statement. 87 (Page 51 of the 1994 Annual Report) American Water Works Company, Inc., and Subsidiary Companies NOTE 5: LEASES The company has entered into operating leases involving certain facilities and equipment. Rental expenses under operating leases were $8,264,000 for 1994, $8,706,000 for 1993 and $7,954,000 for 1992. Capital leases currently in effect are not significant. At December 31, 1994, the minimum annual future rental commitment under operating leases that have initial or remaining noncancellable lease terms in excess of one year are as follows (in thousands): ================================================= 1995 $ 4,099 1996 3,175 1997 2,496 1998 1,775 1999 1,236 Later years 3,879 - ------------------------------------------------- $16,660 ======= NOTE 6: COMMON STOCKHOLDERS' EQUITY Dividend Reinvestment and Stock Purchase Plan The company's Dividend Reinvestment and Stock Purchase Plan was amended on July 1, 1993, to provide for optional cash purchases of newly issued common stock of the company. In addition to permitting record holders of common stock to have all or part of their dividends automatically reinvested in additional shares of common stock, the plan permits stockholders to purchase up to $5,000 of common stock each month directly from the company. The additional shares are offered at a 5% discount from the prevailing market price. Costs associated with the plan of $507,000 in 1994 and $299,000 in 1993 were charged to paid-in capital. Employees' Stock Ownership Plan The company and its subsidiaries have an Employees' Stock Ownership Plan which provides for beneficial ownership of company common stock by all employees who are not included in a bargaining unit and have more than one year of service. The company will make a basic annual contribution to the plan equal to 1/2% of each participating employee's compensation for the preceding year. In addition, each participant can elect to contribute an amount that does not exceed 2% of the participant's compensation for the preceding year. The company will make matching contributions in an amount equal to 100% of each participant's contribution. The company expensed contributions of $1,366,000 for 1994, $1,350,000 for 1993 and $1,316,000 for 1992 that it made to the plan. The trustee of the plan may purchase shares of the company's common stock from the company, on the open market, or from a qualified stockholder. Savings Plan for Employees The company and its subsidiaries implemented a 401(k) Savings Plan for Employees on August 1, 1993 for all employees who have more than six months of service. Each employee can elect to contribute up to 6% of their compensation to the plan. Employee contributions are invested at the direction of the employee in one or more funds including a fund consisting entirely of common stock of the company. The company will make matching contributions in an amount equal to 40% of the first 3% of each employee's pay contributed to any fund. Prior to August 1, 1994 the company was making matching contributions equal to 30% of the first 2% of each employee's pay contributed to the plan. All of the company's matching contributions are invested in the fund of company common stock. The trustee of the plan may purchase shares of the company's common stock from the company at the prevailing market price, on the open market, or from a qualified stockholder. The company expensed matching contributions to the plan totaling $999,000 for 1994 and $291,000 for 1993. Long-Term Performance-Based Incentive Plan In 1994 the company implemented a Long-Term Performance-Based Incentive Plan effective as of January 1, 1993. Under the plan, designated executives and other key employees will be eligible to receive awards if performance goals based on earnings-per-share growth and total return to company stockholders, in comparison to a designated peer group of water companies, are met. The plan is administered by the Compensation and Management Development Committee of the Board of Directors. The Committee will determine the value or range of values, including the maximum value, of awards to each participant. Awards may be paid in the form of cash, restricted shares of common stock, or a combination of both. The market value of common stock expected to be awarded under the plan has been recorded as unearned compensation and is shown as a separate component of common stockholders' equity. The unearned compensation is being charged to expense over the vesting period. Such expense was $914,000 in 1994. 88 (Page 52 of the 1994 Annual Report) NOTES TO FINANCIAL STATEMENTS Stockholder Rights Plan Each share of the company's common stock has one Flip-Over Right and one Flip-In Right ("The Rights") attached. The Rights will not be exercisable until such time as a person or group (an "Acquiring Person") acquires or announces an offer for 25% or more of the company's common stock. The Rights will then entitle the holder to buy from the company one-half share of the company's common stock for $40. Thereafter, if the company is acquired in a merger or business combination in which the company does not survive or, if 50% or more of the company's assets or earning power are sold or transferred, each Flip-Over Right will become the right to buy, at twice its then current exercise price, that number of shares of the acquiring person's common stock which at that time have a market value of four times the then current exercise price of the Flip-Over Right. If an Acquiring Person (i) acquires beneficial ownership of 35% or more of the company's common stock, (ii) acquires the company in a merger or business combination transaction in which the company survives and its stock is not changed or (iii) engages in certain self-dealing transactions, each Flip-In Right not owned by the acquiror will become the right to buy, at twice its then current exercise price, that number of shares of the company's common stock which at that time has a market value of four times the then current price of the Flip-In Right. The Rights are redeemable, in whole, but not in part, by the company at a price of $.0005 per Right under certain circumstances. The Rights do not have voting or dividend rights and, until they become exercisable, have no dilutive effect on the earnings per share of the company. NOTE 7: COMMITMENTS AND CONTINGENCIES Construction programs of subsidiaries for 1995 are estimated to cost approximately $314,000,000. Commitments have been made in connection with certain construction programs. In 1988, a subsidiary filed suit against the Grafton Water District in Massachusetts to recover the fair market value of water utility assets taken by eminent domain. The District initially paid $1,099,000 for the system that had served 2,300 customers. In 1990, a jury ruled that the District should pay an additional $4,501,000 plus interest for the property. After the jury verdict, the District appealed the decision and also caused legislation to be enacted by the Commonwealth of Massachusetts that purports to relieve the District from paying the judgment. The District's appeal has been denied and the subsidiary has filed suit to appeal the constitutionality of the enacted legislation. The subsidiary and the District are currently attempting to negotiate a settlement to resolve this matter. Because of the uncertainty surrounding this award, no recognition has been given to it in the accompanying financial statements. The company is routinely involved in condemnation proceedings and legal actions relating to several regulated subsidiaries. In the opinion of management, none of these matters will have a material adverse effect, if any, on the financial position or results of operations of the company. NOTE 8: FAIR VALUES OF FINANCIAL INSTRUMENTS The following methods and assumptions were used by the company in estimating its fair value disclosures for financial instruments: Current assets and current liabilities: The carrying amount reported in the balance sheet for current assets and current liabilities, including bank debt, approximates their fair values. Preferred stocks with mandatory redemption requirements and long-term debt: The fair values of the company's preferred stocks with mandatory redemption requirements and long-term debt are estimated using discounted cash flow analyses based on the company's current incremental financing rates for similar types of securities. The carrying amounts and fair values of the company's financial instruments at December 31, 1994 and 1993 are as follows (in thousands):
Carrying 1994 Amount Fair Value ============================================================================== Preferred stocks of the company with mandatory redemption requirements $ 40,000 $ 40,356 Preferred stocks of subsidiaries with mandatory redemption requirements 43,737 41,838 Long-term debt of the company 131,000 126,432 Long-term debt of subsidiaries 1,249,022 1,210,456
Carrying 1993 Amount Fair Value ============================================================================== Preferred stocks of the company with mandatory redemption requirements $ 40,000 $ 44,854 Preferred stocks of subsidiaries with mandatory redemption requirements 46,515 51,198 Long-term debt of the company 131,000 143,799 Long-term debt of subsidiaries 1,059,508 1,199,330
89 (Page 53 of the 1994 Annual Report) American Water Works Company, Inc., and Subsidiary Companies NOTE 9: ACQUISITION On August 31, 1993, American Water Works Company, Inc. and its subsidiaries in Indiana, Missouri, and Ohio acquired four Midwestern water utilities. A total of $62,000,000 was paid for the common stock of ICWC Holdings, Inc. and its subsidiary Indiana Cities Water Corporation, Missouri Cities Water Company, Ohio Suburban Water Company and Northern Michigan Water Company. The acquisitions were recorded using the purchase method and resulted in the recording of a utility plant acquisition adjustment in the amount of $38,000,000 and a deferred tax liability on this book/tax temporary difference of $10,800,000. The company's results of operations for the year ended December 31, 1993 included four months of results from the acquired companies' operations. NOTE 10: UTILITY PLANT Utility plant by category information at December 31 is as follows (in thousands):
1994 1993 ============================================================================== Water plant Sources of supply $ 140,743 $ 134,787 Treatment and pumping 634,792 598,236 Transmission and distribution 1,468,584 1,379,501 Services, meters and fire hydrants 553,262 520,019 General structures and equipment 200,609 184,517 Wastewater plant 32,351 30,974 Construction in progress 149,866 80,475 - ------------------------------------------------------------------------------ 3,180,207 2,928,509 Less-accumulated depreciation 535,128 484,232 - ------------------------------------------------------------------------------ $2,645,079 $2,444,277 =====================
NOTE 11: QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized quarterly financial data for 1994 and 1993 (in thousands, except per share amounts) are as follows:
FIRST SECOND THIRD FOURTH 1994 QUARTER QUARTER QUARTER QUARTER TOTAL =============================================================================== Operating revenues $177,659 $195,136 $209,844 $187,602 $770,241 Operating income 36,815 48,700 54,528 42,770 182,813 Net income 10,430 22,729 27,815 17,678 78,652 Net income to common stock 9,434 21,733 26,820 16,681 74,668 Net income per common share $ .30 $ .68 $ .84 $ .51 $ 2.34
FIRST SECOND THIRD FOURTH 1993 QUARTER QUARTER QUARTER QUARTER TOTAL =============================================================================== Operating revenues $155,472 $179,935 $200,154 $181,976 $717,537 Operating income 35,281 45,532 52,402 39,252 172,467 Net income 10,161 21,857 28,651 14,718 75,387 Net income to common stock 9,159 20,855 27,655 13,722 71,391 Net income per common share $ .30 $ .67 $ .88 $ .44 $ 2.29
90 (Page 57 of the 1994 Annual Report) COMPANY INFORMATION Dividend Reinvestment and Stock Purchase Through the company's Dividend Reinvestment and Stock Purchase Plan, shareholders of American Water Works Company, Inc. can automatically reinvest all or part of their dividends in American Water common stock and purchase additional shares of company stock at a 5 % discount. Also, customers of American Water's regulated subsidiaries may buy initial shares of common stock through the plan. For more information or an application for participation contact The First National Bank of Boston, Mail Stop 45-02-09, P.O. Box 644, Boston, MA 02102-0644 or call (800) 736-3001 or (617) 575-3100. Shareholder Information Inquiries regarding shareholder stock ownership, dividends or the transfer/reissuance of shares can be addressed to our Transfer Agent, The First National Bank of Boston at Mail Stop 45-02-09, P.O. Box 644, Boston, MA 02102-0644 or telephone (800) 736-3001 or (617) 575-3100. Transfer requests sent by mail should provide the appropriate instructions. Other shareholder inquiries should be directed to W. Timothy Pohl, Esq., General Counsel and Secretary, P.O. Box 1770, Voorhees, NJ 08043, telephone (609) 346-8200. Investor Relations Investors desiring information about the company can contact Michael N. Kilpatric, Vice President, Corporate Communications, P.O. Box 1770, Voorhees, NJ 08043, telephone (609) 346-8200. Annual Meeting The 1995 Annual Meeting of American Water Works Company shareholders will be held on Thursday, May 4, at 11:00 a.m. at the company's Corporate Center, 1025 Laurel Oak Road, Voorhees, New Jersey. RANGE OF MARKET PRICES AWK is the trading symbol of American Water Works Company, Inc. on the New York Stock Exchange on which the Common Stock, 5% Preferred Stock and 5% Preference Stock of the company are traded.
Common Stock 5% Preferred Stock 5% Preference Stock - --------------------------------------------------------------------------------------------------------------- Newspaper listing AmWtr A Wat pr A Wat pf - --------------------------------------------------------------------------------------------------------------- 1994 High Low High Low High Low =============================================================================================================== 1st quarter $32-1/4 $27-5/8 $22-1/2 $20-3/4 $22-1/2 $20 2nd quarter 29-5/8 26-3/8 21 18-1/8 20-3/4 18 3rd quarter 28-1/4 26 19-3/4 17-1/2 20-3/4 18 4th quarter 27-1/2 25-1/4 19 16-1/2 18-3/4 16-1/2
Quarterly dividend paid per share 27 cents 31-1/4 cents 31-1/4 cents Number of stockholders at December 31, 1994 28,761 293 1,007
- --------------------------------------------------------------------------------------------------------------- 1993 =============================================================================================================== 1st quarter $27-5/8 $24-7/8 $20 $18-3/4 $20 $18-5/8 2nd quarter 28 24-5/8 19-5/8 18-1/2 19-5/8 18-1/2 3rd quarter 32-1/4 27 21 19 22-1/2 19-1/8 4th quarter 31-5/8 29 22-1/2 20-1/4 23 21-1/4
Quarterly dividend paid per share 25 cents 31-1/4 cents 31-1/4 cents - ---------------------------------------------------------------------------------------------------------------
The common and 5% preferred stocks have voting rights. EX-21 4 91 EXHIBIT 21 AMERICAN WATER WORKS COMPANY, INC. AND SUBSIDIARY COMPANIES Subsidiaries of the Registrant The following list includes the Registrant and all of its subsidiaries as of December 31, 1994. The voting stock of each company shown indented is owned, to the extent indicated by the percentage, by the company immediately above which is not indented to the same degree. All subsidiaries of the Registrant appearing in the following table are included in the consolidated financial statements of the Registrant and its subsidiaries. Percentage State of Voting Stock Name of Company Incorporation Owned American Water Works Company, Inc. American Commonwealth Company Delaware 100 American Commonwealth Management Services Company, Inc. Delaware 100 American International Water Services Co. Delaware 100 American Water Works Service Company, Inc. Delaware 100 California-American Water Company California 100 Greenwich Water System, Inc. Delaware 100 Connecticut-American Water Company Connecticut 100 Hampton Water Works Company New Hampshire 100 Massachusetts-American Water Company Massachusetts 100 New York-American Water Company, Inc. New York 100 The Salisbury Water Supply Company Massachusetts 100 Illinois-American Water Company Illinois 99.61 Indiana-American Water Company, Inc. Indiana 100 Iowa-American Water Company Delaware 94.77 Kentucky-American Water Company Kentucky 100 Maryland-American Water Company Maryland 100 Missouri-American Water Company Missouri 100 New Jersey-American Water Company, Inc. New Jersey 100* New Mexico-American Water Company, Inc. New Mexico 99.98 Northern Michigan Water Company Michigan 100 Occoquan Land Corporation Virginia 100 Ohio-American Water Company Ohio 100 Ohio Suburban Water Company Ohio 100 Paradise Valley Water Company Arizona 100 Pennsylvania-American Water Company Pennsylvania 95.34** Tennessee-American Water Company Tennessee 99.77 Virginia-American Water Company Virginia 100 West Virginia-American Water Company West Virginia 99.90 Bluefield Valley Water Works Company Virginia 100 - ---------------------------------------------------------------------------- * Includes 9.50% which is owned by American Commonwealth Company, an affiliate of the Registrant. ** Includes .19% and 2.47% which are owned by American Commonwealth Company and Greenwich Water System, Inc., respectively, affiliates of the Registrant. EX-27 5
UT This schedule contains summary financial information extracted from the consolidated financial statements set forth in Form 10-K report of the Registrant for 1994. 0000318819 ROBERT D. SIEVERS 1,000 12-MOS DEC-31-1994 DEC-31-1994 PER-BOOK 2,645,079 81,040 170,577 283,535 26,423 3,206,654 40,824 73,741 618,875 733,440 83,737 17,961 1,308,043 82,425 0 0 73,929 0 0 0 907,119 3,206,654 770,241 49,912 537,516 587,428 182,813 5,927 188,740 110,088 78,652 3,984 74,668 34,386 105,730 177,344 2.34 0
-----END PRIVACY-ENHANCED MESSAGE-----