UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Delaware 06-0619596
- - -------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S.Employer Identification No.)
incorporation or organization)
High Ridge Park
P.O. Box 3801
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Registrant's telephone number, including area code: (203) 329-8800
Securities registered pursuant to Section 12(b) of the Act:
Common Stock Series A, par value $.25 per share New York Stock Exchange Common Stock Series B, par value $.25 per share New York Stock Exchange Guarantee of Convertible Preferred Securities of Citizens Utilities Trust New York Stock Exchange Citizens Convertible Debentures Guarantee of Partnership Preferred Securities of Citizens Utilities Capital L.P. - - ------------------------------ -------------------------------------- (Title of each class) (Name of exchange on which registered) |
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 twelve 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 ninety 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 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 nonaffiliates of the registrant as of February 28, 1997 was $2,709,973,572
The number of shares outstanding of each of the registrant's classes of common
stock as of February 28, 1997 were:
Common Stock Series A 154,236,035
Common Stock Series B 85,513,449
DOCUMENTS INCORPORATED BY REFERENCE
The Proxy Statement for the registrant's 1997 Annual Meeting of Stockholders to be held on May 22, 1997, is incorporated by reference into Part III of this Form 10-K.
Item 1. Description of Business
(a) General Development of Business
The "Company" includes Citizens Utilities Company and its subsidiaries except where the context or statement indicates otherwise. The Company is a communications and public services company which provides, either directly or through subsidiaries, telecommunications, electric transmission and distribution, natural gas transmission and distribution, water distribution and wastewater treatment services to customers in areas of 22 states.
The Company was incorporated in Delaware in 1935 to acquire the assets and business of a predecessor corporation. Since then, the Company has grown as a result of investment in owned communications and public services operations and from numerous acquisitions of additional communications and public services operations. It continues to expand through internal investment, acquisitions and joint ventures in the rapidly evolving telecommunications industry and in traditional public services and related fields. The Company's strong financial resources and consistent operating performance enable it to make the investments and conduct the operations necessary to serve growing areas and to expand through acquisitions.
(b) Financial Information about Industry Segments
The Consolidated Statements of Income and Note 11 of the Notes to Consolidated Financial Statements included herein sets forth financial information about industry segments of the Company for the last three fiscal years.
(c) Narrative Description of Business
TELECOMMUNICATIONS
Through subsidiaries, the Company provides both regulated and competitive telecommunications services to all segments of the marketplace. Telecommunications services consist of local network service, network access service, long distance service, competitive access service, directory advertising, centrex, paging, cellular, internet access, conference call, and direct broadcast satellite. The Company provides local network services to the following approximate number of primarily residential access lines in the following states:
State Access Lines
------ ------------
New York 285,100
West Virginia 134,000
Arizona 125,800
California 115,100
Tennessee 87,600
Nevada 23,600
Utah 19,100
Idaho 18,800
Oregon 13,100
Montana 7,400
New Mexico 4,600
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Total 834,200
==========
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The Company also provides long distance services to 179,100 of its local network services access lines and to 40,000 access lines outside its franchised service territories. Cable television services are provided to approximately 6,300 customers in Arizona, Nevada and New Mexico. Competitive access services, such as enhanced network, data and video services, are provided to primarily medium and large corporate and exchange carrier customers through fiber optic networks in the following service areas: Phoenix, Arizona; Sacramento, California; Portland, Oregon; Salt Lake City, Utah; and Seattle, Washington.
In February 1996, the Telecommunications Act of 1996 (the "Act") became law. The Act provides for the removal of barriers that currently prevent telephone, cable television and broadcast companies from entering each other's business. The Act addresses various aspects of competition and regulation within the communications industry including elimination of barriers to compete in the local network services market and the creation of interconnection obligations and related pricing guidelines.
The Federal Communications Commission's ("FCC") Interconnection Order issued in August 1996, the first of three expected competition-related orders, is designed to regulate the local network services market competition provisions of the Act. Subject to the rural telephone company exemption discussed below, the Interconnection Order affects the Company's local network services business as follows:
(a) Local Exchange Companies ("LECs") must provide interconnection to any new local network services competitor upon request. This interconnection must be at least equal in quality to that provided by the LEC to itself or its affiliates. Also, the order mandates that the LEC provide this interconnection at just, reasonable and nondiscriminatory rates, terms and conditions.
(b) LECs must provide unbundled network elements, including support systems, to telecommunications carriers that intend to provide local network services or network-access services in their markets. These network elements include network interface devices; local loops; local and tandem switches (including all related software-based features); interoffice transmission facilities; signaling and call-related database facilities; and operations support systems and information.
(c) LECs must make retail services available to competitors at wholesale rates. The Order contains pricing guidelines for wholesale services and interconnection and unbundled elements. Should pricing negotiations between LECs and new entrants become deadlocked, the Order also provides a standard for arbitration to be applied by the respective State Commissions.
Several local exchange companies filed petitions to review the Interconnection Order with the Federal Courts and requested that the pricing provisions of the Interconnection Order be stayed pending full judicial review. On October 15, 1996, the Eighth Circuit Court of Appeals entered an order which stayed the effectiveness of the pricing and other provisions of the Interconnection Order. The FCC and certain telecommunications companies requested review of the Eighth Circuit's Stay Order by the United States Supreme Court; however, the Supreme Court declined to make such a review. The portions of the Interconnection Order which were not stayed remain effective.
Because of its smaller size and smaller market service areas, the Company's local network services business has a qualified exemption from the FCC Interconnection Order. That exemption continues until a bona fide request for interconnection is received and a State Commission with jurisdiction determines that discontinuation of the exemption is technically feasible. This is consistent with universal service principles and will not impose an undue economic hardship on the Company.
The Company is pursuing an aggressive growth strategy to take advantage of opportunities in the emerging telecommunications marketplace. This strategy includes expansion of the Company's customer base and telecommunications services provided. The Company's customer base expansion is focused on its franchised service territories, markets adjacent to these franchised service territories and customers of affiliated companies. The Company's objective in expanding its telecommunications services is to become a full service telecommunications provider offering customers an integrated package of products and services. The Company is expanding into additional markets by offering its long distance service in combination with other value-added services such as CLASS services including caller ID, voice mail, conference calling, centrex, cellular, paging, direct broadcast satellite, and internet access. The Company sells its products using multiple sales distribution channels and a marketing organization structured around product management and customer segmentation.
The Company owns a one-third interest and is general managing partner of Mohave Cellular, a cellular limited partnership operating eight cell sites in Arizona.
In order to meet the growth in the local network services, network access services and long distance businesses , the Company is modernizing its local networks. In certain areas, the Company is upgrading its digital switches and replacing analog and microwave facilities with fiber optics and digital microwave. Signaling System 7 ("SS7") capabilities will be extended to nearly all digital switches. Telemarketing and conference calling capabilities are being further enhanced and the Company plans to expand internet access service into several markets in 1997.
The Company completed construction of a fiber-optic route from Las Vegas, Nevada to Phoenix, Arizona which provides the Company with fiber-optic capacity for its operations as well as for other telecommunications carriers. The Company has established the foundation of an internet backbone service by providing frame relay connectivity in Washington, Oregon, California, Utah, Nevada and Arizona; and also provides private line, Local Area Network to Local Area Network and video teleconferencing services. The Company has established alliances and is negotiating additional alliances with power utilities to open long haul routes and access new markets.
The Company currently provides wholesale network access services and billing and collections services primarily to AT&T Corp., MCI Communications Corp. and Sprint Corp. The Company is expanding its network to offer distribution capability to independent telephone companies and emerging competitive local exchange providers and wireless companies. The Company is expanding its network access services business to also offer marketing services, operator services, and network monitoring.
The Company currently contracts for advertising sales, printing and distribution for its 75 telephone directories with a circulation of approximately 1,500,000. In 1996, the Company implemented Audiotex, an electronic information service which is available 24-hours per day, seven days per week and is free to its customers. Audiotex provides consumer tips; Add Talk, which allows advertisers to update and expand printed advertising information; Teletips, which provides frequently updated information like news, weather, sports and entertainment; and point of purchase guides with approximately fifty available information categories on topics such as medical, dental, legal and insurance. Audiotex is currently operating in seven major markets. The Company plans to expand this service to four more markets in 1997. Audiotex creates new customer opportunities such as fax-on-demand and phone-poll services.
A subsidiary of the Company, in a joint venture with a subsidiary of Century Communications, Corp. ("Century"), acquired and operates two cable television systems in southern California serving 49,500 subscribers. Century is a cable television company of which Leonard Tow, the Chairman, Chief Executive Officer and Chief Financial Officer of the Company, is Chairman and Chief Executive Officer. In addition, Claire Tow, a director of the Company, is a Senior Vice President and a director of Century and Robert Siff, a director of the Company, is a director of Century. The joint venture is governed by a management board on which the Company and Century are equally represented. A subsidiary of Century (the "Manager") manages the day-to-day operations of the systems. The Manager does not receive a management fee but is reimbursed only for the actual costs it incurs on behalf of the joint venture. With respect to the purchase of any service or asset for the joint venture for use in the systems, the Manager is obligated to pass through to the joint venture any discount, up to 5%, off the published prices of vendors and is entitled to retain any discount in excess of 5%. On August 19, 1996, the joint venture entered into agreements to acquire three additional cable television systems serving a total of 76,000 subscribers in southern California for approximately $140,000,000. The acquisitions are subject to regulatory approval and are expected to close in the first half of 1997.
On December 2, 1996, the Company acquired Conference-Call USA, Inc. in a stock for stock transaction. Conference-Call USA, Inc. provides nationwide conference calling services and its subsidiary, Dial, Inc., provides international dial-back services.
On February 3, 1997, the Company entered into a definitive agreement to acquire Ogden Telephone Company in a stock for stock transaction. Ogden Telephone Company serves approximately 20,000 customers in the suburban Rochester, New York area. The agreement is subject to pending New York State Public Service Commission and federal regulatory approvals.
Operating divisions of the Company provide natural gas transmission and distribution services to the following approximate number of primarily residential customers in the following states:
State Customers
------------
Louisiana 264,100
Arizona 94,500
Colorado 12,600
-------
Total 371,200
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The provision of services and/or rates charged are subject to the jurisdiction of federal and state regulatory agencies. The Company purchases all needed natural gas, the supply of which is believed to be adequate to meet current demands and to provide for additional sales to new customers. The natural gas industry is subject to seasonal demand, with the peak demand occurring during the heating season of November 1 through March 31. The Company's natural gas sector experiences third party competition from fuel oil, propane, and other natural gas suppliers for most of its large consumption customers (of which there are few) and from electric suppliers for all of its customer base. The competitive position of natural gas at any given time depends primarily on the relative prices of natural gas and these other energy sources.
The Company continues to expand its Arizona natural gas transmission and distribution service areas. The service areas have grown from 65,300 customers at December 31, 1991 to 94,500 customers as of December 31, 1996.
On January 9, 1997, the Company entered into a definitive agreement to purchase all of the outstanding stock of Gasco, Inc., a subsidiary of BHP Hawaii, Inc., for approximately $100,000,000. Gasco Inc. is a gas distribution company serving 70,000 customers in Hawaii. The transfer of ownership is expected to be completed in the second half of 1997, pending Hawaii Public Utilities Commission and federal regulatory approvals.
Operating divisions of the Company provide electric transmission and distribution services to the following approximate number of primarily residential customers in the following states:
State Customers
------------
Arizona 60,400
Hawaii 29,300
Vermont 20,100
-----------
Total 109,800
===========
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The provision of services and/or rates charged are subject to the jurisdiction of federal and state regulatory agencies. The Company purchases approximately 80% of needed electric energy, the supply of which is believed to be adequate to meet current demands and to provide for additional sales to new customers. Generally, the Company's electric sector does not experience material seasonal fluctuations.
The electric industry is in the process of moving to a more competitive business through changes in both federal and state regulation and legislation. The industry is shifting toward electric customers being able to choose their energy provider much like telephone customers are able to choose their long distance provider. The electric distribution component of the business will likely remain a state regulated monopoly while many other portions of the business, such as power supply, will either be deregulated or regulations will be significantly modified. Deregulation could potentially result in stranded plant investments, stranded costs for supply contracts and stranded costs associated with programs to promote the most efficient use of electricity and reduce the environmental impact of generation facilities. The states in which the Company currently operates are moving at varying speeds toward a more competitive industry. While the Company cannot predict the impact of competition on all components of its electric operations, or whether its electric operations will eventually be subject to deregulation, the Company's efficient operations, limited investment in generation and capability to deliver multiple, diverse services should place it in an excellent position to excel in a competitive environment.
Through subsidiaries, the Company provides water distribution, wholesale water transmission, wastewater treatment, public works consulting, marketing and billing services to the following approximate number of primarily residential customers in the following states:
State Customers
-----------
Arizona 110,600
Illinois 69,800
California 59,400
Pennsylvania 28,600
Ohio 14,700
Indiana 1,300
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Total 284,400
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The provision of services and/or rates charged are subject to the jurisdiction of federal, state and local regulatory agencies. A significant portion of the Company's water/wastewater treatment sector construction expenditures serving new customers are made under agreements with land developers who generally advance plant and/or funds for construction to the Company that are later refunded in part by the Company as new customers and revenues are added in the respective land developments.
In addition to increasing customers through agreements with land developers, the Company acquires water and/or wastewater operations from municipalities and private companies. Through its subsidiary, Citizens Public Works Service Company, the Company plans to provide water and wastewater operations and maintenance services to municipalities in the United States and abroad.
Privatization opportunities are increasing as the water and wastewater industries in the United States continue to face significant changes due to increasing demands for advanced technical expertise and capital to meet the requirements of more stringent environmental regulations. Internationally, developing countries are looking to the expertise of existing water and wastewater companies to provide a sound infrastructure of water and wastewater systems. Citizens' geographic and service diversity and decades of experience in the water and wastewater industry provide a strong platform to successfully meet these needs and respond to the increasing trend for privatization.
The Company's water and wastewater treatment operations are regulated under the Safe Drinking Water Act and the Clean Water Act. In August 1996, the 1996 Safe Drinking Water Act Amendments became Law. There are several new requirements under the Amendments, including reports to consumers on water quality, operator certification, and source water protection. The greatest impact to the water sector will be the processes regulators will use to establish standards for new contaminants. With this new approach, regulators are given the flexibility to set priorities in contaminant selection rather than follow a fixed schedule.
The Company's water distribution and wastewater treatment operations are strengthening its environmental management system by implementing the ISO 14000 Standard for Environmental Management Systems. ISO 14000 is a total quality management tool for activities that affect the environment. Compliance with ISO 14000 benefits the Company by improving environmental management, minimizing risk and creating a framework for improved relations with regulators. Once implemented, the program will be integrated into the Company's activities. Many of the procedures required by ISO 14000 are already in place at the Company's water and wastewater operations. There are no capital requirements for this effort.
The Company's operations are conducted primarily in small and medium size towns and communities. No material part of the Company's business is dependent upon a single customer or small group of customers for its revenues. As a result of its diversification, the Company is not dependent upon any single geographic area for its revenues. Due to this diversity, no single regulatory body regulates a service of the Company accounting for more than 20% of its 1996 revenues.
The Company is subject to regulation by the respective state regulatory agencies and federal regulatory agencies. The Company is not subject to the Public Utility Holding Company Act. Order backlog is not a significant consideration in the Company's business, and the Company has no contracts or subcontracts which may be subject to renegotiation of profits or termination at the election of the federal government. The Company holds franchises from local governmental bodies, which vary in duration. The Company also holds certificates of convenience and necessity granted by various state commissions which are generally of indefinite duration. The Company has no special working capital practices. The Company's research and development activities are not material. There are no patents, trademarks, licenses or concessions held by the Company that are material.
The Company had approximately 5,400 employees at December 31, 1996.
In 1995, the Company made a $4,200,000 investment in and entered into definitive agreements with Hungarian Telephone and Cable Corp. ("HTCC"), a Delaware corporation, which owns and operates local telephone concessions in Hungary. Pursuant to these agreements, as amended, (i) the Company has rights to purchase up to 58% of HTCC common stock, (ii) provides certain management services to HTCC on a cost-plus basis, (iii) has the right to and has designated one member, out of seven, of the HTCC Board of Directors, and (iv) provided HTCC with guarantees and financial support. The management services fee payable by HTCC to the Company is the greater of 5% of adjusted gross revenues of HTCC or a monthly fixed amount. In addition, expenses incurred by the Company in providing such services, including certain allocable overhead items, are reimbursed by HTCC. The Company has been compensated for all guarantees and financial support which it has provided to HTCC. The Company's investment in HTCC is accounted for using the cost method of accounting.
Item 2. Description of Property
The Administrative Offices of the Company are located at High Ridge Park, Stamford, Connecticut, 06905 and are leased. The Company owns property including: telecommunications outside plant, central office, microwave radio and fiber-optic facilities; electric generation, transmission and distribution facilities; gas transmission and distribution facilities; water production, treatment, storage, transmission and distribution facilities; and wastewater treatment, transmission, collection and discharge facilities; all of which are necessary to provide services at the locations listed below.
State Service(s) Provided
------ -------------------
Arizona Electric, Natural Gas,
Telecommunications,*
Water, Wastewater
California Telecommunications, Water
Colorado Natural Gas
Florida Telecommunications
Hawaii Electric
Idaho Telecommunications
Illinois Water, Wastewater,
Telecommunications
Indiana Water
Louisiana Natural Gas
Maryland Telecommunications
Montana Telecommunications
Nevada Telecommunications
New Mexico Telecommunications
New York Telecommunications
Ohio Water, Wastewater
Oregon Telecommunications
Pennsylvania Water
Tennessee Telecommunications
Utah Telecommunications
Vermont Electric
Washington Telecommunications
West Virginia Telecommunications*
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* Certain properties are subject to mortgage deeds pursuant to Rural Utilities Service borrowings.
Item 3. Legal Proceedings
In November 1995, the Company's electric operation in Vermont was permitted an 8.5% rate increase. Subsequently the Vermont Public Service Board has called into question the level of rates awarded in connection with its formal review of allegations made by the Department of Public Service (the "DPS"), the consumer advocate in Vermont, and a former Citizens employee seeking penalties and other relief. The major issues in this proceeding commenced on September 1, 1995 and involve proper classification of certain costs to property, plant and equipment accounts and the Company's Demand Side Management ("DSM") program. In addition, the DPS believes that the Company should have sought and received regulatory approvals prior to construction of certain facilities in prior years. Hearings commenced in November 1996 and should conclude by the end of the first half of 1997. The final outcome of the various allegations is to be decided by the Vermont Public Service Board and such decision is expected by June 1997. Although the Company believes that there will not be a material effect on the Company's financial condition or results of operations as a result of this proceeding and the practices complained of have been rectified, it is possible that the decision of the Vermont Public Service Board could be unfavorable to the Company. The Company has provided a reserve of approximately $800,000 for the potential effects of this proceeding.
Item 4. Submission of Matters to Vote of Security Holders
None in fourth quarter 1996.
Executive Officers
Information as to Executive Officers of the Company as of February 28, 1997 follows:
Name Age Current Position and Office
---- --- ---------------------------
Leonard Tow 68 Chairman of the Board, Chief
Executive Officer and Chief
Financial Officer
Daryl A. Ferguson 58 President and Chief Operating Officer
Robert J. DeSantis 41 Vice President and Treasurer
J. Michael Love 45 Vice President, Citizens Public Services
Robert L. O'Brien 54 Vice President, Regulatory Affairs
Livingston E. Ross 48 Vice President and Controller
David B. Sharkey 47 President, Electric Lightwave, Inc.
Ronald E. Spears 48 Vice President, Telecommunications
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There is no family relationship between any of the officers of the Registrant. The term of office of each of the foregoing officers of the Registrant will continue until the next annual meeting of the Board of Directors and until a successor has been elected and qualified.
LEONARD TOW has been associated with the Registrant since April 1989 as a Director. In June 1990, he was elected Chairman of the Board and Chief Executive Officer. In October 1991, he was appointed to the additional position of Chief Financial Officer of the Registrant. He has also been a Director, Chief Executive Officer and Chief Financial Officer of Century Communications Corp. since its incorporation in 1973, and Chairman of its Board of Directors since October 1989.
DARYL A. FERGUSON has been associated with the Registrant since July 1989. He was Vice President, Administration from July 1989 through March 1990 and Senior Vice President, Operations and Engineering from March 1990 through June 1990. He has been President and Chief Operating Officer since June 1990. During the period April 1987 through July 1989, he was President and Chief Executive Officer of Microtecture Corporation. He is currently a Director of Centennial Cellular Corp.
ROBERT J. DeSANTIS has been associated with the Registrant since January 1986. He was Assistant to the Treasurer through May 1986 and Assistant Treasurer from June 1986 through September 1991. He has been Vice President and Treasurer since October 1991.
J. MICHAEL LOVE has been associated with the Registrant since May 1990 and from November 1984 through January 1988. He was Assistant Vice President, Regulatory Affairs and Community Relations from June 1986 through January 1988. He left the Registrant in January 1988 to become President and General Counsel of Southern New Hampshire Water Company. He rejoined the Registrant in April 1990 and was Assistant Vice President, Corporate Planning from June 1990 through March 1991. He was Vice President, Corporate Planning from March 1991 through January 1997. He was appointed Vice President, Citizens Public Services in January 1997.
ROBERT L. O'BRIEN has been associated with the Registrant since March 1975. He has been Vice President, Regulatory Affairs since June 1981.
LIVINGSTON E. ROSS has been associated with the Registrant since August 1977. He was Manager of Reporting from September 1984 through March 1988, Manager of General Accounting from April 1988 through September 1990 and Assistant Controller from October 1990 through November 1991. He has been Vice President and Controller since December 1991.
DAVID B. SHARKEY has been associated with the Registrant since August 1994 and has been President of Electric Lightwave, Inc. since that date. Prior to joining the Registrant, he was Vice President and General Manager of MobilMedia, a wireless company headquartered in New Jersey from August 1989 through July 1994.
RONALD E. SPEARS has been associated with the Registrant since June 1995 and has been Vice President, Telecommunications since that date. Prior to joining the Registrant, he was Managing Director at Russell Reynolds Associates, an executive recruiting firm from April 1994 to May 1995. He was Chairman and Chief Executive Officer, and prior to that, President and Chief Operating Officer of Videocart, Inc. from February 1991 to March 1994. He served as President, MCI Midwest, an operating division of MCI Telecommunications from September 1984 to January 1991. He is currently a Director of Hungarian Telephone and Cable Corp.
PART II
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded on the New York Stock Exchange under the
symbols CZNA and CZNB for Series A and Series B, respectively. The following
table indicates the high and low prices per share as taken from the daily
quotations published in the "Wall Street Journal" during the periods indicated.
Prices have been adjusted retroactively for subsequent stock dividends, rounded
to the nearest 1/8th. (See Note 8 of Notes to Consolidated Financial
Statements.)
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
High Low High Low High Low High Low
---- --- ---- --- ---- --- ---- ---
1996:
- - ----
Series A $12 1/8 $10 1/8 $11 3/4 $10 1/4 $12 1/8 $10 1/4 $12 $10 1/2
Series B $12 1/8 $10 1/4 $11 7/8 $10 1/4 $12 1/8 $10 5/8 $12 1/8 $10 1/2
1995:
- - ----
Series A $12 3/4 $11 $11 5/8 $ 9 5/8 $10 3/4 $ 9 7/8 $12 3/8 $ 9 7/8
Series B $12 3/4 $10 7/8 $11 5/8 $ 9 3/4 $10 3/4 $10 $12 1/2 $ 9 7/8
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As of February 28, 1997, the approximate number of record security holders of the Company's Common Stock Series A and Series B was 27,559 and 23,683, respectively. This information was obtained from the Company's transfer agent.
DIVIDENDS
Quarterly stock dividends declared and issued on both Common Stock Series A and Series B were 1.6% for each quarter of 1996. Quarterly stock dividends declared and issued on both Common Stock Series A and Series B were 1.5% for the first and second quarters of 1995 and 1.6% for the third and fourth quarters of 1995. An annual cash dividend equivalent rate of 71 3/4 and 67 3/4 per share (adjusted for all stock dividends paid subsequent to all dividends declared through December 31, 1996, and rounded to the nearest 1/8th) was considered by the Company's Board of Directors in establishing the Series A and Series B stock dividends during 1996 and 1995, respectively. (See Note 8 of Notes to Consolidated Financial Statements.)
RECENT SALES OF UNREGISTERED SECURITIES
During 1996, the Company sold securities that were not registered under the Securities Act of 1933, in the transactions described below, pursuant to the exemption contained in section 3 (a) (2). The proceeds of each of the following issuances are used to fund qualifying construction expenditures.
On August 1, 1996, Berks County Industrial Development Authority (Pennsylvania), on behalf of the Company, issued $16,700,000 aggregate principal amount of its Industrial Development Revenue Bonds 1996 Series. The underwriters were Lehman Brothers Inc. and Morgan Stanley & Co. Incorporated.
The Department of Budget and Finance of the State of Hawaii remarketed the following Special Purpose Revenue Bonds on behalf of the Company on the following dates.
~ On January 18, 1996, $10,000,000 aggregate principal amount of Special Purpose Revenue Bonds 1988 Series B, remarketed by Lehman Brothers Inc.
~ On October 1, 1996, $14,000,000 aggregate principal amount of Special Purpose Revenue Bonds 1988 Series A, remarketed by Morgan Stanley & Co. Incorporated and Lehman Brothers Inc.
~ On October 1, 1996, $10,000,000 aggregate principal amount of Special Purpose Revenue Bonds 1988 Series C, remarketed by Morgan Stanley & Co. Incorporated and Lehman Brothers Inc.
~ On November 19, 1996, $9,400,000 aggregate principal amount of Special Purpose Revenue Bonds 1985 Series, remarketed by Lehman Brothers Inc. and Morgan Stanley & Co. Incorporated.
On September 3, 1996, Northampton County Industrial Development Authority (Pennsylvania) remarketed $18,250,000 aggregate principal amount of Industrial Development Revenue Bonds 1988 Series, on behalf of the Company. The remarketing agents were Morgan Stanley & Co. Incorporated and Lehman Brothers Inc.
Aggregate underwriting commissions paid in connection with the above described issuances were $33,400.
Year Ended December 31,
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1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Operating revenues $ 1,306,517 $ 1,069,032 $ 906,150 $ 613,099 $ 576,881
Net income $ 178,660 $ 159,536 $ 143,997 125,630 $ 115,013
Earnings per-share of Common
Stock Series A and Series B(1) $ .77 $ .69 $ .68 .60 $ .55
Stock dividends declared on Common Stock
Series A and Series B (2) 6.56% 6.35% 5.04% 4.37% 5.61%
As of December 31,
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Total assets $ 4,523,148 $ 3,918,187 $ 3,576,566 2,627,118 $ 1,887,981
Long-term debt $ 1,509,697 $ 1,187,000 $ 994,189 547,673 $ 522,699
Equity(3) $ 1,879,433 $ 1,559,913 $ 1,156,896 974,486 $ 837,271
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(1) Adjusted for subsequent stock dividends and splits; no adjustment has been
made for the Company's 1.6% first quarter 1997 stock dividend because the
effect is immaterial.
(2) Compounded annual rate of quarterly stock dividends.
(3) Includes EPPICS (see Item 7(a) below).
On January 22, 1996, a subsidiary of the Company issued 4,025,000 shares of 5% Company Obligated Mandatorily Redeemable Convertible Preferred Securities (also known as Equity Providing Preferred Income Convertible Securities or "EPPICS") having a liquidation preference of $50 per security and a maturity date of January 15, 2036. Each security is currently convertible into 3.465 shares of the Company's Common Stock Series A at a conversion price of $14.429 per share (as adjusted for subsequent stock dividends paid on Series A Common Stock). The $196,722,000 of net proceeds from the sale of these securities was used to permanently fund a portion of the purchase price of properties acquired from GTE Corp. and ALLTEL Corporation.
Proceeds from the following additional security issuances and borrowings during 1996 were used to repay outstanding commercial paper, fund and/or prefund expenditures for the construction, extension and improvement of the Company's facilities and for general corporate purposes.
Date Security/Borrowing Amount Rate Maturity
- - ---- ------------------ ------ ---- --------
January 22 Rural Utilities Service Loan Contract $ 4,464,000 5.83% December 31, 2027
June 11 Debentures 100,000,000 6.80% August 15, 2026
August 1 Industrial Development Revenue Bonds 16,700,000 3.67% July 1, 2031
September 25 Rural Utilities Service Loan Contract 4,515,000 6.08% December 31, 2027
November 12 State of California Department of
Water Resources Loan 2,166,000 2.42% November 30, 2026
December 6 Debentures 200,000,000 7.05% October 1, 2046
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The following Fixed Rate Industrial Development and Special Purpose Revenue Bonds were converted and remarketed to Weekly Rate or Money Market Bonds during 1996:
Initial
Interest
Date Bonds Amount Rate Maturity Date
- - ---- ------------------------------------ ----------- -------- -------------
January 18 7.25% 1988 Series B, Special Purpose
Revenue Bonds $10,000,000 3.31% September 1, 2018
September 3 7% 1988 Series Industrial Development
Revenue Bonds 18,250,000 3.35% September 1, 2018
October 1 7.9% 1988 Series A, Special Purpose
Revenue Bonds 14,000,000 3.63% September 1, 2018
October 1 7.375% 1988 Series C, Special Purpose
Revenue Bonds 10,000,000 3.63% September 1, 2018
November 19 7.375% 1985 Series Special Purpose
Revenue Bonds 9,400,000 3.53% November 1, 2015
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On September 27, 1996, a subsidiary of the Company received approval for an additional $41,200,000 of borrowings under loan contracts with the Rural Utilities Service. Proceeds from those borrowings will be used to reimburse the Company's treasury for funds spent on the construction or improvement of qualifying telecommunications facilities in Arizona.
On December 4, 1996, the Company acquired Conference-Call USA, Inc. ("Conference-Call") in a stock for stock transaction. The Company issued 1,289,133 shares of Common Stock Series A in exchange for all of the common and preferred shares of Conference-Call. If Conference-Call achieves specified financial results in future periods, the Company may issue up to 1,443,299 additional shares of Common Stock Series A.
On January 9, 1997, the Company entered into a definitive agreement to purchase all of the outstanding stock of Gasco, Inc., a subsidiary of BHP Hawaii, Inc., for approximately $100,000,000. The transfer of ownership is expected to be completed in the second half of 1997, pending Hawaii Public Utilities Commission and federal regulatory approvals.
On February 3, 1997, the Company entered into a definitive agreement to acquire Ogden Telephone Company in a stock for stock transaction. The agreement is subject to pending New York State Public Service Commission and federal regulatory approvals.
The Company considers its operating cash flows and its ability to raise debt and equity capital as the principal indicators of its liquidity. Although working capital is not considered to be an indicator of the Company's liquidity, the Company experienced an increase in its working capital at December 31, 1996. The increase is primarily due to the repayment of outstanding commercial paper with the proceeds from the issuance of the EPPICS. The Company has committed lines of credit with commercial banks under which it may borrow up to $600,000,000. There were no amounts outstanding under these lines at December 31, 1996.
Net capital expenditures, by sector, have been and are budgeted as follows:
Budget Actual
----------------------------------------
1997 1996 1995 1994
----------- ---------- ----------- -----------
(in thousands)
Communications $463,000 $225,600 $141,100 $173,200
Public Services:
Natural Gas 43,000 27,700 28,700 26,200
Electric 25,000 24,600 32,800 34,400
Water and Wastewater 36,000 21,000 28,000 22,300
General 46,000 18,900 10,100 20,800
----------- ----------- ----------- -----------
$613,000 $317,800 $240,700 $276,900
=========== =========== =========== ===========
|
The Company anticipates that the funds necessary for its 1997 capital expenditures will be provided from operations; from 1993, 1994, 1995 and 1996 Series Industrial Development Revenue Bond construction fund trust account requisitions; advances from Rural Utilities Service loan contracts; from commercial paper notes payable; from parties desiring utility service; from debt, equity and other financings at appropriate times; and, if deemed advantageous, from short-term borrowings under bank credit facilities.
During 1996, the Company was authorized increases in annual revenues for properties in Arizona, Pennsylvania, Hawaii and Louisiana totaling $22,300,000; $6,000,000 of such increases were granted in an interim order dated June 1995. The Company currently has requests for $22,100,000 of increases in annual revenues pending before regulatory commissions in Arizona and California.
In February 1996, the Telecommunications Act of 1996 (the "Act") became law. The Act provides for the removal of barriers that currently prevent telephone, cable television and broadcast companies from entering each other's business. The Act addresses various aspects of competition and regulation within the communications industry including elimination of barriers to compete in the local network services market and the creation of interconnection obligations and related pricing guidelines.
The Federal Communications Commission's ("FCC") Interconnection Order issued in August 1996, the first of three expected competition-related orders, is designed to regulate the local network services market competition provisions of the Act. Subject to the rural telephone company exemption discussed below, the Interconnection Order affects the Company's local network services business as follows:
(a) Local Exchange Companies ("LECs") must provide interconnection to any new local network services competitor upon request. This interconnection must be at least equal in quality to that provided by the LEC to itself or its affiliates. Also, the order mandates that the LEC provide this interconnection at just, reasonable and nondiscriminatory rates, terms and conditions.
(b) LECs must provide unbundled network elements, including support systems, to telecommunications carriers that intend to provide local network services or network-access services in their markets. These network elements include network interface devices; local loops; local and tandem switches (including all related software-based features); interoffice transmission facilities; signaling and call-related database facilities; and operations support systems and information.
(c) LECs must make retail services available to competitors at wholesale rates. The Order contains pricing guidelines for wholesale services and interconnection and unbundled elements. Should pricing negotiations between LECs and new entrants become deadlocked, the Order also provides a standard for arbitration to be applied by the respective State Commissions.
Several local exchange companies filed petitions to review the Interconnection Order with the Federal Courts and requested that the pricing provisions of the Interconnection Order be stayed pending full judicial review. On October 15, 1996, the Eighth Circuit Court of Appeals entered an order which stayed the effectiveness of the pricing and other provisions of the Interconnection Order. The FCC and certain telecommunications companies requested review of the Eighth Circuit's Stay Order by the United States Supreme Court; however, the Supreme Court declined to make such a review. The portions of the Interconnection Order which were not stayed remain effective.
Because of its smaller size and smaller market service areas, the Company's local network services business has a qualified exemption from the FCC Interconnection Order. That exemption continues until a bona fide request for interconnection is received and a State Commission with jurisdiction determines that discontinuation of the exemption is technically feasible. This is consistent with universal service principles and will not impose an undue economic hardship on the Company.
The electric industry is in the process of moving to a more competitive business through changes in both federal and state regulation and legislation. The industry is shifting toward electric customers being able to choose their energy provider much like telephone customers are able to choose their long distance provider. The electric distribution component of the business will likely remain a state regulated monopoly while many other portions of the business, such as power supply, will either be deregulated or regulations will be significantly modified. Deregulation could potentially result in stranded plant investments, stranded costs for supply contracts and stranded costs associated with programs to promote the most efficient use of electricity and reduce the environmental impact of generation facilities. The states in which the Company currently operates are moving at varying speeds toward a more competitive industry. While the Company cannot predict the impact of competition on all components of its electric operations, or whether its electric operations will eventually be subject to deregulation, the Company's efficient operations, limited investment in generation and capability to deliver multiple diverse services should place it in an excellent position to excel in a competitive environment.
During 1996, the Company's Vermont operations have been the subject of a comprehensive rate review. Although the Company believes that there will not be a material effect on the Company's financial condition or results of operations as a result of this proceeding, the Company has provided a reserve of approximately $800,000 for the potential impact of this proceeding.
The Company's water and wastewater treatment operations are regulated under the Safe Drinking Water Act and the Clean Water Act. In August 1996, the 1996 Safe Drinking Water Act Amendments became Law. There are several new requirements under the Amendments, including reports to consumers on water quality, operator certification, and source water protection. The greatest impact to the water sector will be the processes regulators will use to establish standards for new contaminants. With this new approach, regulators are given the flexibility to set priorities in contaminant selection rather than follow a fixed schedule.
Communications Revenues 1996 1995 1994
- - ----------------------- ------------------- -------------------------- --------
Increase over Increase over
Amount Prior year Amount Prior year Amount
Telecommunications Revenues ($ in thousands)
- - ------------------ ---------- ------------ --------- ------------- ------
Network Access Services $ 394,821 15% $ 343,761 26% $ 272,573
Local Network Services 235,043 19% 197,947 41% 139,896
Long Distance Service 67,634 328% 15,800 n/a 0
Directory Service 30,248 22% 24,866 39% 17,843
Other 58,561 70% 34,373 29% 26,563
---------- --------- --------- ------- ----------
$ 786,307 27% $ 616,747 35% $ 456,875
=========== ========= ========== ======== ===========
|
Revenues from Network Access Services grew $51.1 million, or 15%, over 1995 primarily due to the properties acquired from ALLTEL in 1996 and 1995, increased switched and special access revenues, and increased billing and collections revenue.
Revenues from Local Network Services increased $37.1 million, or 19%, over 1995 primarily due to the properties acquired from ALLTEL in 1996 and 1995, customer growth, increased usage and the sale of other enhanced services.
Long Distance Service revenues grew by $51.8 million, or 328%, from 1995, primarily due to a strong in-territory focus on converting existing local network services customers to the Company's long distance service. Market share penetration in December 1996, in terms of minutes of use, approximated 16%, up from a market share of 2% in December 1995. In addition, the Company's retail sales force began selling in adjacent markets, acquiring both long distance and reselling dialtone market share.
Revenues from Directory Service increased $5.4 million, or 22%, over 1995 primarily due to an increase in the number of directories acquired from ALLTEL in 1996 and 1995, and an increase in advertising revenues.
Other communications revenues increased $24.2 million, or 70%, over 1995 primarily due to the properties acquired from ALLTEL in 1996 and 1995.
The revenue increases for 1995 as compared with 1994 were primarily due to the properties acquired from GTE and ALLTEL.
Public Services Revenues 1996 1995 1994
- - ------------------------ ----------------------- -------------------------- -------
Increase over Increase over
Amount Prior year Amount Prior year Amount
------ ---------- ------ ---------- ------
Natural Gas Revenues ($ in thousands)
- - --------------------
Residential $ 134,888 22% $ 110,146 (6%) $ 117,266
Commercial 49,633 22% 40,614 (7%) 43,497
Industrial 40,230 14% 35,244 0% 35,342
Transportation 5,519 30% 4,255 11% 3,846
Other 9,349 22% 7,643 (15%) 8,989
----------- -------- ---------- -------- ----------
$ 239,619 21% $ 197,902 (5%) $ 208,940
=========== ======== ========== ======== ===========
|
The increase in natural gas revenues in 1996 was primarily the result of rate increases in Louisiana and Arizona. In addition to the rate increases, there was increased consumption by residential customers in Louisiana due to colder than normal weather conditions which was partially offset by decreased usage in Arizona due to milder than expected weather conditions and decreased consumption by industrial customers in Louisiana due to rising gas prices. The decrease in revenues in 1995 was primarily due to lower average revenue per MCF of gas sold which resulted from pass-ons to customers of lower average gas costs from suppliers; this decrease was partially offset by increased consumption. Pass-ons are a reduction in the cost of gas sold which savings is passed on to customers and therefore does not affect net income.
Public Services Revenues (cont'd) 1996 1995 1994
- - --------------------------------- ------------------------ ------------------------- -------
Increase over Increase over
Amount Prior year Amount Prior year Amount
--------- ----------- ------- ----------- ------
($ in thousands)
Electric Revenues
- - -----------------
Residential $ 79,893 10% $ 72,460 2% $ 71,322
Commercial 55,826 7% 52,152 5% 49,597
Industrial 44,165 12% 39,362 11% 35,376
Other 12,413 9% 11,377 (2%) 11,645
---------- -------- ----------- ------- -----------
$ 192,297 10% $ 175,351 4% $ 167,940
========== ======== =========== ======= ===========
The increase in electric revenues in 1996 was primarily due to rate increases in
Hawaii and Vermont and increased consumption at the Company's Arizona electric
operations resulting from customer growth. The increase in revenues in 1995 was
primarily due to a rate increase in Hawaii and increased consumption in Hawaii
and Arizona.
|
1996 1995 1994
------------------------ ------------------------- -------
Increase over Increase over
Amount Prior year Amount Prior year Amount
--------- ----------- ------- ----------- ------
($in thousands)
Water and Wastewater Revenues
- - -----------------------------
Residential $ 70,845 12% $ 63,377 8% $ 58,414
Commercial 13,801 12% 12,279 12% 10,953
Industrial 843 46% 576 (6%) 615
Other 2,805 0% 2,800 16% 2,413
-------- ------- --------- -------- ---------
$ 88,294 12% $ 79,032 9% $ 72,395
======== ======= ========= ======== =========
|
The increase in water and wastewater treatment revenues in 1996 and 1995 was primarily the result of rate increases as well as increased residential and commercial consumption at the Company's California and Arizona Water properties.
1996 1995 1994
------------------------ ------------------------- -------
Increase over Increase over
Amount Prior year Amount Prior year Amount
--------- ----------- ------- ----------- ------
($ in thousands)
Operating Expenses
- - ------------------
Operating expenses $ 413,841 35% $ 306,734 25% $ 244,877
Depreciation 193,733 22% 158,935 38% 115,175
Natural gas purchased 127,913 18% 108,385 (7%) 116,419
Maintenance expense 101,206 16% 87,255 41% 61,779
Electric energy and fuel oil purchased 93,191 9% 85,168 5% 80,931
Taxes other than income 80,947 18% 68,382 16% 58,845
----------- -------- ---------- -------- -----------
$ 1,010,831 24% $ 814,859 20% $ 678,026
============ ======== =========== ======== ===========
|
The increases in operating expenses in both 1996 and 1995 were primarily due to expenses related to acquired telecommunications properties and marketing costs associated with long distance and other new service offerings.
The increases in depreciation expense in both 1996 and 1995 were due to an increase in depreciable plant primarily as a result of acquisitions.
The increase in 1996 and decrease in 1995 in the cost of natural gas purchased are primarily due to fluctuations in the price of natural gas. Under tariff provisions, increases and decreases in the Company's costs of natural gas purchased are passed-on to customers. In addition, there was increased consumption by residential customers in Louisiana due to colder than normal weather conditions which was partially offset by decreased usage in Arizona due to milder than expected weather conditions and decreased consumption by industrial customers in Louisiana due to rising gas prices.
The increases in maintenance expenses in 1996 and 1995 were primarily due to the telecommunications properties acquired.
The increase in electric energy and fuel oil purchased in 1996 was primarily due to an increase in consumption driven by an increase in demand and customer growth. The increase in electric energy and fuel oil in 1995 was primarily due to an increase in demand, customer growth and an increase in fuel oil prices. Under tariff provisions, increases and decreases in the Company's costs of electric energy and fuel oil purchased are passed-on to customers.
Taxes other than income increased in both 1996 and 1995 primarily due to increased payroll and gross receipts taxes associated with the acquired telecommunications properties.
1996 1995 1994
--------------------- -------------------- ---------
Amount Prior year Amount Prior year Amount
------ ---------- ------ ---------- ------
($ in thousands)
Investment income $ 48,972 18% $ 41,667 3% $ 40,454
|
The increase in investment income in 1996 is primarily due to $22 million earned from Hungarian Telephone and Cable Corp. for guarantees and financial support provided by the Company. Investment income in 1995 included $14.4 million of realized gains on investments sold to permanently fund telecommunications acquisitions partially offset by the effect of a decrease in the funds available for investment by the Company.
1996 1995 1994
--------------------- -------------------- ---------
Increase over Increase over
Amount Prior year Amount Prior year Amount
------ ---------- ------ ---------- ------
($ in thousands)
Interest expense $ 92,695 6% $ 87,775 21% $ 72,744
|
The increases in interest expense in 1996 and 1995 were primarily due to the issuance of additional debt to fund acquisitions and capital expenditures. These increases were partially offset by the refinancing of outstanding debt at lower interest rates.
1996 1995 1994
--------------------- -------------------- ---------
Increase over Increase over
Amount Prior year Amount Prior year Amount
------ ---------- ------ ---------- ------
($ in thousands)
Income taxes $ 84,937 27% $ 66,817 4% $ 64,323
|
The increase in income tax expense in 1996 was primarily due to an increase in taxable income and a 2% higher effective tax rate.
1996 1995 1994
--------------------- -------------------- ---------
Increase over Increase over
Amount Prior year Amount Prior year Amount
------ ---------- ------ ---------- ------
($ in thousands)
Net Income $ 178,660 12% $ 159,536 11% $ 143,997
Earnings Per Share $ .77 12% $ .69 1% $ .68
|
Net income and earnings per share increased in 1996 primarily due to increased income from operations and investment income. This was partially offset by $17,300,000 of a noncash charges to pre-tax income for the write off assets which were no longer deemed recoverable in accordance with Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"; and $5,849,000 of dividends on Convertible Preferred Securities (EPPICS).
Net income increased in 1995 despite the loss of $38,000,000 of operating income reported in 1994 which was derived from the discontinued subsidy revenues from Pacific Bell which had been received annually through the end of 1994. Earnings per share increased in 1995 despite the loss of $.11 per share (adjusted for subsequent stock dividends) reported in 1994 which was derived from the discontinued Pacific Bell subsidy and despite the issuance in January 1995 of 19,000,000 additional shares of Common Stock Series A.
The following documents are filed as part of this Report:
1. Financial Statements:
See Index on page F-1.
2. Supplementary Data:
Quarterly Financial Data is included in the Financial Statements
(see 1. above).
None
The Company intends to file with the Commission a definitive proxy statement for the 1997 Annual Meeting of Stockholders pursuant to Regulation 14A not later than 120 days after December 31, 1996. The information called for by this Part III is incorporated by reference to that proxy statement.
(a) The exhibits listed below are filed as part of this Report:
Exhibit
No. Description
- - ------- -----------
3.200.1 Restated Certificate of Incorporation of Citizens Utilities
Company, with all amendments to March 4, 1996
3.200.2 By-laws of the Company, as amended to-date of Citizens Utilities
Company, with all amendments to December 17, 1996
4.100.1 Indenture of Securities, dated as of August 15, 1991, to Chemical
Bank, as Trustee
4.100.2 First Supplemental Indenture, dated August 15, 1991
4.100.3 Letter of Representations, dated August 20, 1991, from Citizens
Utilities Company and Chemical Bank, as Trustee, to Depository
Trust Company ("DTC") for deposit of securities with DTC
4.100.4 Second Supplemental Indenture, dated January 15, 1992, to Chemical
Bank, as Trustee
4.100.5 Letter of Representations, dated January 29, 1992, from Citizens
Utilities Company and Chemical Bank, as Trustee, to DTC, for
deposit of securities with DTC
4.100.6 Third Supplemental Indenture, dated April 15, 1994, to Chemical
Bank, as Trustee
4.100.7 Fourth Supplemental Indenture, dated October 1, 1994, to
Chemical Bank, as Trustee
4.100.8 Fifth Supplemental Indenture, dated as of June 15, 1995, to
Chemical Bank , as Trustee
4.100.9 Sixth Supplemental Indenture, dated as of October 15, 1995, to
Chemical Bank, as Trustee
4.100.11 Seventh Supplemental Indenture, dated as of June 1, 1996
4.100.12 Eighth Supplemental Indenture, dated as of December 1, 1996
4.200.1 Indenture dated as of January 15, 1996, between Citizens
Utilities Company and Chemical Bank, as indenture trustee.
4.200.2 First Supplemental Indenture dated as of January 15, 1996,
between Citizens Utilities Company and Chemical Bank, as
indenture trustee.
4.200.3 5% Convertible Subordinated Debenture due 2036 (contained as
Exhibit A to Exhibit 4.200.2).
4.200.4 Amended and Restated Declaration of Trust dated as of January 15,
1996, of Citizens Utilities Trust.
4.200.5 Convertible Preferred Security Certificate (contained as
Exhibit A-1 to Exhibit 4.200.4)
4.200.6 Amended and Restated Limited Partnership Agreement dated as of
January 15, 1996 of Citizens Utilities Capital L.P.
4.200.7 Partnership Preferred Security Certificate (contained as Annex
A to Exhibit 4.200.6)
4.200.8 Convertible Preferred Securities Guarantee Agreement dated as of
January 15, 1996 between Citizens Utilities Company and Chemical
Bank, as guarantee trustee.
4.200.9 Partnership Preferred Securities Guarantee Agreement dated as
of January 15, 1996 between Citizens Utilities Company and Chemical
Bank, as guarantee trustee
4.200.10 Letter of Representations, dated January 18, 1996, from
Citizens Utilities Company and Chemical Bank, as trustee, to
DTC, for deposit of Convertible Preferred Securities with DTC
10.1 Incentive Deferred Compensation Plan, dated April 16, 1991
10.6 Deferred Compensation Plans for Directors, dated November 26, 1984
and December 10, 1984
10.6.1 Directors' Retirement Plan, effective January 1, 1989
10.6.2 Non-Employee Directors' Deferred Fee Equity Plan dated as of
June 28, 1994
10.16.1 Employment Agreement between Citizens Utilities Company and
Leonard Tow, effective July 11, 1996
10.17 1992 Employee Stock Purchase Plan
10.18 Amendment dated May 21, 1993, to the 1992 Employee Stock Purchase
Plan
10.20 Asset Purchase Agreements, dated November 28, 1994
17
|
10.21 1996 Equity Incentive Plan
12. Computation of ratio of earnings to fixed charges (this item is
included herein for the sole purpose of incorporation by reference)
21. Subsidiaries of the Registrant
23. Auditors' Consent
24. Powers of Attorney
27. Financial Data Schedule
|
Exhibits 10.1, 10.6, 10.6.1, 10.6.2, 10.16.1, 10.17 and 10.18 are management contract or compensatory plans or arrangements.
The Company agrees to furnish to the Commission upon request copies of the Realty and Chattel Mortgage, dated as of March 1, 1965, made by Citizens Utilities Rural Company, Inc., to the United States of America (the Rural Utilities Services and Rural Telephone Bank) and the Mortgage Notes which that mortgage secures; and the several subsequent supplemental Mortgages and Mortgage Notes; copies of the instruments governing the long-term debt of Louisiana General Services, Inc.; and copies of separate loan agreements and indentures governing various Industrial development revenue bonds; and copies of documents relating to indebtedness of subsidiaries acquired during 1996.
Exhibit number 10.6 is incorporated by reference to the same exhibit designation in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1984. Exhibit number 10.6.1 is incorporated by reference to the same exhibit designation in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1989. Exhibit numbers 4.100.1, 4.100.2 and 4.100.3 are incorporated by reference to the same exhibit designation in the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1991. Exhibit numbers 4.100.4, 4.100.5 and 10.1 are incorporated by reference to the same exhibit designation in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1991. Exhibit number 10.17 is incorporated by reference to the same exhibit designation in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992. Exhibit number 10.18 is incorporated by reference to the Registrant's Proxy Statement, dated March 31, 1993. Exhibit numbers 4.100.6 and 4.100.7 are incorporated by reference to the Registrant's Form 8-K Current Reports filed on July 5, 1994 and January 3, 1995, respectively. Exhibit number 10.20 is incorporated by reference to the same exhibit designation in the Registrant's Form 10-K for the year ended December 31, 1994. Exhibit number 10.6.2 is incorporated by reference to the Registrant's Proxy Statement, dated April 4, 1995. Exhibits numbers 4.100.8 and 4.100.9 are incorporated by reference to the Registrant's Form 8-K Current Reports filed March 29, 1996. Exhibit number 3.200.1 is incorporated by reference to the same exhibit designation in the Registrant's Form S-3 filed June 27, 1996. Exhibit number 10.21 is incorporated by reference to the Registrant's Proxy Statement dated March 29, 1996. Exhibits numbers 4.200.1, 4.200.2, 4.200.3, 4.200.4, 4.200.5, 4.200.6, 4.200.7, 4.200.8, 4.200.9 and 4.200.10 are incorporated by reference to the Registrant's Form 8-K Current Report filed May 28, 1996. Exhibit number 10.16.1 is incorporated by reference to the same exhibit designation in the Registrant's Quarterly Report on Form 10-Q for the nine months ended September 30, 1996. Exhibit number 3.200.2 is incorporated by reference to the Registrant's Form 8-K Current Report filed December 23, 1996.
(b) The Company filed on Form 8-K dated December 17, 1996, under Item 7 "Financial Statements, Pro Forma Financial Information and Exhibits", the amended Bylaws of Citizens Utilities Company.
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.
CITIZENS UTILITIES COMPANY
(Registrant)
By: /s/ Leonard Tow
-------------------------------------------
Leonard Tow
Chairman of the Board; Chief Executive Officer;
Chief Financial Officer; Member, Executive Committee and Director
March 17, 1997
|
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 indicated on the 17th day of March 1997.
Signature Title
--------- -----
/s/ Robert J. DeSantis
- - ----------------------------------- Vice President and Treasurer
(Robert J. DeSantis)
/s/ Livingston E. Ross Vice President and Controller
- - -----------------------------------
(Livingston E. Ross)
Norman I. Botwinik* Director
- - -----------------------------------
(Norman I. Botwinik)
Aaron I. Fleischman* Member, Executive Committee and
- - ----------------------------------- Director
(Aaron I. Fleischman)
James C. Goodale* Director
- - -----------------------------------
(James C. Goodale)
Stanley Harfenist* Member, Executive Committee and
- - ----------------------------------- Director
(Stanley Harfenist)
Andrew N. Heine* Director
- - -----------------------------------
(Andrew N. Heine)
Elwood A. Rickless* Director
- - -----------------------------------
(Elwood A. Rickless)
John L. Schroeder* Member, Executive Committee and
- - ----------------------------------- Director
(John L. Schroeder)
Robert D. Siff* Director
- - -----------------------------------
(Robert D. Siff)
Robert A. Stanger* Director
- - -----------------------------------
(Robert A. Stanger)
Edwin Tornberg* Director
- - -----------------------------------
(Edwin Tornberg)
Claire L. Tow* Director
- - -----------------------------------
(Claire L. Tow)
Charles H. Symington, Jr* Director
- - ------------------------------------
(Charles H. Symington, Jr.)
*By: /s/ Robert J. Desantis
--------------------------------
(Robert J. DeSantis)
Attorney-in-Fact
|
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
Index to Financial Statements
Independent Auditors' Report F-2
Consolidated balance sheets as of December 31, 1996, 1995 and 1994 F-3
Consolidated statements of income for the years ended December 31, 1996, 1995 and 1994 F-4 Consolidated statements of shareholders' equity for the years ended December 31, 1996, 1995 and 1994 F-5 Consolidated statements of cash flows for the years ended December 31, 1996, 1995 and 1994 F-6 Notes to consolidated financial statements F-7 |
Independent Auditors' Report
The Board of Directors and Shareholders
Citizens Utilities Company:
We have audited the accompanying consolidated balance sheets of Citizens Utilities Company and subsidiaries as of December 31, 1996, 1995 and 1994, and the related consolidated statements of income, shareholders' equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Citizens Utilities Company and subsidiaries as of December 31, 1996, 1995 and 1994, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
February 28, 1997
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996, 1995 and 1994
(In thousands)
1996 1995 1994
---- ---- ----
Assets
Current assets:
Cash $ 24,230 $ 17,922 $ 14,224
Temporary investments 0 0 108,818
Accounts receivable:
Customers 198,138 164,798 142,873
Other 88,320 37,754 26,350
Less allowance for doubtful accounts 4,808 2,739 2,428
------------ ----------- ------------
Total accounts receivable 281,650 199,813 166,795
Materials and supplies 27,159 18,191 18,330
Other current assets 36,731 16,776 5,887
------------ ----------- ------------
Total current assets 369,770 252,702 314,054
------------ ----------- ------------
Property, plant and equipment 4,582,869 4,187,354 3,583,723
Less accumulated depreciation 1,444,817 1,279,324 1,014,068
------------ ----------- ------------
Net property, plant and equipment 3,138,052 2,908,030 2,569,655
------------ ----------- ------------
Investments 539,152 329,090 325,011
Regulatory assets 174,196 180,572 177,414
Deferred debits and other assets 301,978 247,793 190,432
============ =========== ============
Total assets $ 4,523,148 $ 3,918,187 $ 3,576,566
============ =========== ============
Liabilities and Shareholders' Equity
Current liabilities:
Long-term debt due within one year $ 3,593 $ 3,865 $ 13,986
Short-term debt 0 140,650 515,200
Accounts payable 168,299 178,384 122,404
Income taxes accrued 90,317 72,494 92,366
Interest accrued 24,522 22,527 15,841
Customers' deposits 21,400 20,501 19,919
Other current liabilities 101,358 65,257 72,105
------------ ----------- ------------
Total current liabilities 409,489 503,678 851,821
Deferred income taxes 347,975 314,094 248,150
Customer advances for construction 154,324 150,000 145,150
Deferred credits 115,291 101,300 77,950
Contributions in aid of construction 84,129 73,923 71,580
Regulatory liabilities 22,810 28,279 30,830
Long-term debt 1,509,697 1,187,000 994,189
Company obligated mandatorily redeemable
convertible preferred securities * 201,250 0 0
Shareholders' equity 1,678,183 1,559,913 1,156,896
------------ ----------- ------------
Total liabilities and shareholders' equity $ 4,523,148 $ 3,918,187 $ 3,576,566
============ =========== ============
|
* Represents securities of a subsidiary trust, the sole assets of which are securities of a subsidiary partnership, substantially all the assets of which are convertible debentures of the Company.
The accompanying Notes are an integral part of these Consolidated Financial Statements.
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 and 1994
(In thousands, except for per-share amounts)
1996 1995 1994
---- ---- ----
Revenues:
Communications $ 786,307 $ 616,747 $ 456,875
Public Services 520,210 452,285 449,275
----------- ----------- -----------
Total revenues 1,306,517 1,069,032 906,150
----------- ----------- -----------
Operating expenses:
Operating expenses 413,841 306,734 244,877
Depreciation 193,733 158,935 115,175
Natural gas purchased 127,913 108,385 116,419
Maintenance expenses 101,206 87,255 61,779
Electric energy and fuel oil purchased 93,191 85,168 80,931
Taxes other than income 80,947 68,382 58,845
----------- ----------- -----------
Total operating expenses 1,010,831 814,859 678,026
----------- ----------- -----------
Income from operations 295,686 254,173 228,124
Investment income 48,972 41,667 40,454
Other income - net 17,483 18,288 12,486
Interest expense 92,695 87,775 72,744
----------- ----------- -----------
Income before income taxes 269,446 226,353 208,320
Income taxes 84,937 66,817 64,323
----------- ----------- -----------
Income before dividends on convertible preferred securities 184,509 159,536 143,997
Dividends on convertible preferred securities, net of income tax benefit 5,849 0 0
----------- ----------- -----------
Net income $ 178,660 $ 159,536 $ 143,997
=========== =========== ===========
Earnings per share of Common Stock Series A and Series B $ .77 $ .69 $ .68
=========== =========== ===========
|
The accompanying Notes are an integral part of these Consolidated Financial Statements.
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 and 1994
(In thousands, except for per-share amounts)
Unrealized gain
Additional (loss) on available-
Common stock ($.25) paid-in Retained for-sale
Series A Series B capital earnings securities Total
-------- -------- ------- ------- --------- -----
Balance January 1, 1994 $ 32,447 $ 13,119 $ 698,688 $ 230,232 $ 0 $ 974,486
Acquisitions 126 4,646 3,231 8,003
Net income 143,997 143,997
Stock dividends in shares of
Common Stock Series A and Series B 1,621 686 137,736 (140,043) 0
Stock plans 88 281 20,911 21,280
Conversions of Series A to Series B (570) 570 0
Change in unrealized gain (loss) on
securities classified as available-
for-sale, net of income taxes 9,130 9,130
---------- ----------- ------------- ----------- ---------- -----------
Balance December 31, 1994 $ 33,586 14,782 $ 861,981 $ 237,417 $ 9,130 $ 1,156,896
---------- ----------- ------------- ----------- ---------- -----------
Acquisitions 222 (4,485) 374 (3,889)
Net income 159,536 159,536
Stock dividends in shares of
Common Stock Series A and Series B 2,374 1,024 158,693 (162,091) 0
Common stock buybacks to fund stock
dividends (115) (352) (21,561) (22,028)
Stock issuance 4,750 238,830 243,580
Stock plans 150 475 30,236 30,861
Conversions of Series A to Series B (1,906) 1,906 0
Change in unrealized gain (loss) on
securities classified as available-
for-sale, net of income taxes (5,043) (5,043)
--------- ----------- ------------- ----------- ---------- -----------
Balance December 31, 1995 $ 38,839 18,057 $ 1,263,694 $ 235,236 $ 4,087 $ 1,559,913
--------- ----------- ------------- ----------- ---------- -----------
Acquisitions 322 15,308 15,630
Net income 178,660 178,660
Stock dividends in shares of
Common Stock Series A and Series B 2,455 1,246 166,129 (169,830) 0
Common stock buybacks to fund stock
dividends (339) (1,300) (73,842) (75,481)
Stock plans 127 203 6,959 7,289
Stock issuances to fund EPPICS
dividends 178 7,621 7,799
EPPICS issuance cost (4,528) (4,528)
Conversions of Series A to Series B (2,771) 2,771 0
Change in unrealized gain (loss) on
securities classified as available-
for-sale, net of income taxes (11,099) (11,099)
--------- ----------- ------------- ----------- ---------- -----------
Balance December 31, 1996 $ 38,811 $ 20,977 $ 1,381,341 $ 244,066 $ (7,012) $ 1,678,183
========= =========== ============= =========== ========== ===========
|
The accompanying Notes are an integral part of these Consolidated Financial Statements.
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 and 1994
(In thousands)
1996 1995 1994
---- ---- ----
Net cash provided by operating activities $ 375,181 $ 338,611 $ 262,316
------------ ------------ ------------
Cash flows used for investing activities:
Securities matured 43,608 120,691 89,885
Securities sold 87,447 92,224 23,478
Construction expenditures (348,379) (245,241) (263,162)
Securities purchased (332,332) ( 86,058) ( 18,219)
Business acquisitions (87,683) (223,926) (700,222)
Other (47,802) 55 (13,795)
------------ ------------ ------------
(685,141) (342,255) (882,035)
------------ ------------ ------------
Cash flows from financing activities:
Long-term debt borrowings 351,053 321,280 458,589
Issuance of EPPICS 196,722 0 0
Issuance of common stock 6,049 272,687 18,465
Short-term debt (repayments) borrowings (140,650) (374,550) 135,200
Common stock buybacks to fund stock dividends (75,481) (22,028) 0
Long-term debt principal payments (20,243) (192,030) ( 1,268)
Other (1,182) 1 ,983 1,219
------------ ------------ ------------
316,268 7,342 612,205
------------ ------------ ------------
Increase (decrease) in cash 6,308 3,698 (7,514)
Cash at January 1, 17,922 14,224 21,738
============ ============ ============
Cash at December 31, $ 24,230 $ 17,922 $ 14,224
============ ============ ============
|
The accompanying Notes are an integral part of these Consolidated Financial Statements.
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
Notes to Financial Statements
The preparation of financial statements in conformity with Generally Accepted Accounting Principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Certain communications revenues are estimated under cost separation procedures that base revenues on current operating costs and investments in facilities to provide such services.
The Company continuously monitors the applicability of SFAS 71 to its regulated operations. SFAS 71 may, at some future date, be deemed inapplicable due to changes in the regulatory and competitive environments and/or a decision by the Company to accelerate deployment of new technology. If the Company were to discontinue the application of SFAS 71 to one or more of its regulated operations, the Company would be required to write off its regulatory assets and regulatory liabilities associated with such operation(s) and would be required to adjust the carrying amount of any other assets, including property, plant and equipment, that would be deemed not recoverable. The Company believes its regulated operations continue to meet the criteria for SFAS 71 and that the carrying value of its regulated property, plant and equipment is recoverable in accordance with established rate-making practices.
Temporary investments in 1994 represented investments in state and municipal securities which matured in less than one year, the proceeds of which were intended to be and were used to repay a portion of the short-term debt issued to partially and temporarily fund the acquisitions of the GTE and ALLTEL Telecommunications Properties (see Note 3). Such investments were considered held-to-maturity and were carried at amortized cost.
Short-term debt outstanding was issued in the form of commercial paper notes payable to temporarily and partially fund the acquisition of the GTE and ALLTEL Telecommunications Properties. This short-term debt was repaid with the maturity proceeds of company investments and with proceeds from the issuance of Equity Providing Preferred Income Convertible Securities ("EPPICS," see Note 7).
The terms of the Preferred Security provide that the Preferred Security may be converted by the holder into Centennial common stock and that it accreted a liquidation value preference through August 31, 1996 at a fixed annual dividend rate of 7.5%, compounded quarterly, until the Preferred Security reached a liquidation value preference of $186,287,000 on August 31, 1996.
The Company recognized the non-cash accretion on the Preferred Security as it was earned in each period through August 31, 1996 as investment income and increased the book value of its investment in Centennial by the same amount. The liquidation value preferences earned on the Preferred Security for 1996, 1995 and 1994 were $8,993,000, $14,353,000 and $13,481,000, respectively. From inception through August 31, 1996, $57,787,000 of such accretion was accounted for in this manner. The Preferred Security is mandatorily redeemable on August 30, 2006.
Commencing September 1, 1996, Centennial has the option to either (a) declare and pay or accumulate an 8.5% annual dividend on the Preferred Security's $186,287,000 liquidation value or (b) redeem the Preferred Security for $186,287,000 in cash or in Centennial common stock. Centennial declared the required $3,959,000 dividend for the quarter ended November 30, 1996 and paid the dividend on December 19, 1996.
On a quarterly basis, the Company assesses whether the book value of the Preferred Security can be realized by comparing such book value to the market value of Centennial's common equity and by evaluating other relevant indicators of realizability including Centennial's ability to redeem the Preferred Security. The carrying value of the Preferred Security would be deemed impaired to the extent that such carrying value exceeds the estimated realizability of the Preferred Security based on all existing facts and circumstances including the Company's assessment of its ability to realize the carrying value of the Preferred Security through mandatory redemption. The Company believes it can realize its investment in Centennial either by cash redemption by the issuer funded through refinancing by the issuer, by temporary conversion to common equity securities followed by the sale of the common equity securities, or by sale of its current investment holdings.
1996 1995 1994
---- ---- ----
($ in thousands)
Transmission and distribution facilities $2,923,630 $2,641,594 $2,159,452
Production and generating facilities 960,422 868,119 818,927
Administrative facilities 368,178 337,196 285,445
Construction work in progress 187,692 212,892 210,213
Pumping, storage and purification facilities 122,340 107,653 93,942
Intangibles and other 20,607 19,900 15,744
------------- ------------- -------------
$4,582,869 $4,187,354 $3,583,723
============= ============= =============
|
In July 1995, the Company acquired Flex Communications ("Flex") in a stock for stock transaction. Flex was a switch-based, inter-exchange carrier providing long distance, 800 Inbound long-distance, voice mail, paging, private data networks and cellular services to approximately 5,500 customers in upstate New York. The Company issued 855,953 shares of Common Stock Series B for all of the outstanding shares of Flex. This transaction was accounted for using the pooling of interests method of accounting. Prior year financial statements were not restated as the amounts were not significant.
In March 1995, the Company acquired Douglassville Water Company
("Douglassville") for $173,000 and 31,928 shares of Common Stock Series
B. Douglassville provided water utility services in Pennsylvania to
approximately 870 customers. This transaction was accounted for using the
purchase method of accounting and the results of operations of
Douglassville have been included in the accompanying financial statements
from the date of acquisition.
In February 1995, the Company acquired from the town of Youngtown, Arizona, for $1,192,000, the town's water and wastewater systems which served approximately 3,400 customers. This acquisition was accounted for using the purchase method of accounting and the results of operations of Youngtown have been included in the accompanying financial statements from the date of acquisition.
In November 1994, the Company and ALLTEL Corporation signed definitive agreements pursuant to which the Company agreed to acquire from ALLTEL certain telecommunications properties in eight states serving approximately 110,000 local telephone access lines and certain cable television systems serving approximately 7,000 subscribers ("ALLTEL Telecommunications Properties"). The purchase price of the ALLTEL Telecommunications Properties (net of 3,600 of the Company's telephone access lines which were valued at $10 million and transferred to ALLTEL in a tax free exchange) was $282 million. All such access lines were transferred to the Company on or before March 31, 1996. These transactions were accounted for using the purchase method of accounting and the results of operations of the ALLTEL Telecommunications Properties have been included in the accompanying financial statements from their respective dates of acquisition.
In August 1994, the Company acquired RHC, Inc. ("Metro Utility Co.") in a stock for stock transaction. Metro Utility Co. provided water and wastewater treatment services to approximately 10,000 customers in the suburban Chicago area. The Company issued 504,807 shares of Common Stock Series B for all of the outstanding shares of Metro Utility Co. This transaction was accounted for using the pooling of interests method of accounting.
In May 1993, the Company and GTE Corp. ("GTE") signed definitive agreements pursuant to which the Company agreed to acquire from GTE, for approximately $1.1 billion in cash, certain GTE telecommunications properties serving approximately 500,000 local telephone access lines in eight states ("GTE Telecommunications Properties"). All such access lines were transferred to the Company on or before December 30, 1994. These transactions were accounted for using the purchase method of accounting and the results of operations of the GTE Telecommunications Properties have been included in the accompanying financial statements from their respective dates of acquisition.
The following unaudited pro forma financial information presents the combined results of operations of the Company and the GTE and ALLTEL Telecommunications Properties acquired as if the acquisitions had occurred on January 1 of the year preceding the respective dates acquired. The effects of the other acquisitions described above would not significantly impact the pro forma results. The pro forma financial information does not necessarily reflect the results of operations that would have occurred had the Company and the GTE and ALLTEL Telecommunications Properties constituted a single entity during such periods.
1996 1995 1994
---- ---- ----
($ in thousands, except for per-share amounts)
Revenues $1,311,000 $1,159,000 $1,138,000
Net Income $180,000 $175,000 $172,000
Earnings per share $.77 $.74 $.73
|
A subsidiary of the Company, in a joint venture with a subsidiary of Century Communications, Corp. ("Century"), acquired and operates two cable television systems in southern California serving 49,500 subscribers. Century is a cable television company of which Leonard Tow, the Chairman, Chief Executive Officer and Chief Financial Officer of the Company, is Chairman and Chief Executive Officer. In addition, Claire Tow, a director of the Company, is a Senior Vice President and a director of Century and Robert Siff, a director of the Company, is a director of Century. The joint venture is governed by a management board on which the Company and Century are equally represented. A subsidiary of Century (the "Manager") manages the day-to-day operations of the systems. The Manager does not receive a management fee but is reimbursed only for the actual costs it incurs on behalf of the joint venture. With respect to the purchase of any service or asset for the joint venture for use in the systems, the Manager is obligated to pass through to the joint venture any discount, up to 5%, off the published prices of vendors and is entitled to retain any discount in excess of 5%. The Company accounts for the joint venture following the equity method of accounting. On August 19, 1996, the joint venture entered into agreements to acquire three additional cable television systems serving a total of 76,000 subscribers in southern California for approximately $140 million. The acquisitions are subject to regulatory approval and are expected to close in the first half of 1997.
1996 1995 1994
---- ---- ----
($ in thousands)
State and municipal securities 370,783 $ 172,518 $ 174,790
Centennial Preferred Security 107,629 98,636 84,283
Marketable equity securities 58,351 57,528 65,527
Other fixed income securities 2,389 408 411
----------- ---------- ----------
Total 539,152 $ 329,090 $ 325,011
=========== ========== ==========
|
Marketable equity securities for 1996 and 1995 include the Company's investments in Hungarian Telephone and Cable Corp. ("HTCC"), Centennial Class B Common Stock (see Note 1 (i)) and Century Class A Common Stock. For 1994, marketable equity securities include the Centennial Class B Common Stock and Century Class A Common Stock. The investment in the shares of Century Class A Common Stock represents approximately 2% of the total outstanding common stock of Century. The Chairman, Chief Executive Officer and Chief Financial Officer of the Company is also Chairman and Chief Executive Officer of Century.
Net realized gains on marketable equity securities included in the determination of net income for the years 1996, 1995 and 1994, respectively, were $0, $13,904,000, and $3,760,000. The cost of marketable equity securities sold during 1996, 1995 and 1994, respectively, was $0, $9,863,000, and $384,000. The cost of securities sold was based on the actual cost of the shares of each security held at the time of sale. The Company recognized $22,138,000 in investment income in 1996 for guarantees and financial support provided by the Company to HTCC.
The following summarizes the amortized cost, gross unrealized holding gains and losses and fair market value for investments.
Unrealized Holding Aggregate Fair
Investment Classification Amortized Cost Gains (Losses) Market Value
- - ------------------------- -------------- ------ -------- ------------
($ in thousands)
As of December 31, 1996
Held-To-Maturity $ 107,629 $ 78,658 $ 0 $ 186,287
Available-For-Sale 442,884 2,903 (14,264) 431,523
As of December 31, 1995
Held-To-Maturity $ 244,982 $ 79,808 $ (59) $ 324,731
Available-For-Sale 77,485 8,422 (1,799) 84,108
As of December 31, 1994
Held-To-Maturity $ 259,484 $ 80,293 $ (3,055) $ 336,722
Available-For-Sale 50,809 14,718 0 65,527
|
The amortized cost of held-to-maturity securities plus the aggregate fair market value of available-for-sale securities for each year presented above equals the total of investments presented in the foregoing investments table. As of December 31, 1996 all investments except the Centennial Preferred Security have been classified as available-for-sale.
The Company sold $68,458,000 and $19,335,000 of securities classified as held-to-maturity during 1995 and 1994, respectively, for the purpose of financing a portion of the acquisition of the GTE and ALLTEL Telecommunications Properties; gross realized gains on such sales for 1995 and 1994, respectively, were $474,000 and $372,000, while gross realized losses were $8,000 and $94,000 for 1995 and 1994, respectively.
1996 1995 1994
------------------------------------ ------------------------- ----------
Carrying Carrying Carrying
Amount Fair Value Amount Fair Value Amount Fair Value
------ ---------- ------ ---------- ------ ----------
($ in thousands)
Temporary Investments $ 0 $ 0 $ 0 $ 0 $ 108,818 $ 108,935
Investments 539,152 617,810 329,090 408,839 325,011 402,249
Long-term Debt 1,509,697 1,532,251 1,187,000 1,263,000 994,189 992,349
EPPICS 201,250 192,194 0 0 0 0
|
The fair value of the above financial instruments, except for the investment in the Centennial Preferred Security and certain options on marketable equity securities, are based on quoted prices at the reporting date for those financial instruments. The fair value of the Centennial Preferred Security is estimated to be its accreted value at the respective reporting dates (see Note 1(i)) while the fair value of certain options on marketable equity securities is based on the Black-Scholes option pricing model.
Weighted average
interest rate at December 31, 1996
December 31, 1996 Maturities -------------------------------------------
----------------- ---------- 1996 1995 1994
---- ---- ----
($ in thousands)
Debentures 7.34% 2001 - 2046 $ 1,000,000 $ 700,000 $ 425,000
Industrial development revenue bonds 5.62% 2015 - 2031 391,789 374,089 325,125
Rural Utilities Service Loan Contracts 5.89% 1998 - 2027 77,909 71,609 47,106
Senior unsecured notes 8.05% 2012 36,000 23,000 0
Other long-term debt 6.82% 1998 - 2027 3,999 2,202 9,158
Commercial paper notes payable - - 0 16,100 187,800
---------- ---------- ----------
Total long-term debt $ 1,509,697 $ 1,187,000 $ 994,189
=========== =========== ===========
|
The total principal amounts of industrial development revenue bonds at December 31, 1996, 1995 and 1994 were $422,780,000, $406,080,000, and $392,530,000, respectively. Industrial development revenue bond funds issued are held by a trustee until used for payment of qualifying construction. The amounts presented in the table above represent funds that have been used for construction through December 31, 1996, 1995 and 1994, respectively.
On December 31, 1995 and 1994, certain commercial paper notes payable were classified as long-term debt because these obligations were expected to and have been refinanced with long-term debt securities.
The Company has available lines of credit with commercial banks in the amounts of $400,000,000 and $200,000,000, which expire on December 10, 1997 and December 16, 2002, respectively, and have associated facility fees of one-thirty third of one percent (0.03%) per annum and one-twentieth of one percent (0.05%) per annum, respectively. The terms of the lines of credit provide the Company with extension options.
The installment principal payments and maturities of long-term debt for the next five years are as follows:
1997 1998 1999 2000 2001
---- ---- ---- ----- ----
($ in thousands)
Installment principal payments $3,460 $2,795 $2,821 $2,967 $ 3,100
Maturities 133 5,965 0 274 50,000
------- ------ ------ ------- -------
$3,593 $8,760 $2,821 $3,241 $53,100
======= ====== ====== ======= =======
|
Holders of certain industrial development revenue bonds may tender at par prior to maturity. The next tender date is August 1, 1997 for $30,350,000 of principal amount of bonds. The Company expects to remarket all such bonds which are tendered. In the years 1996, 1995 and 1994, respectively, interest payments on short- and long-term debt were $93,274,000, $78,659,000 and $74,803,000.
In accordance with the terms of the issuances, the Company paid the 5% interest on the Convertible Subordinated Debentures in Citizens' Common Stock Series A. During 1996, 709,748 shares of Common Stock Series A were issued to the Partnership in payment of interest of which 654,119 shares were sold by the Partnership to satisfy cash dividend payment elections by the holders of the EPPICS. The sales proceeds and the remaining 55,629 shares of Common Stock Series A were distributed by the Partnership to the Trust. The Trust distributed the cash and shares as dividends to the holders of the EPPICS.
Quarterly stock dividend rates declared on Common Stock Series A and Series B are based upon cash equivalent rates and share market prices, and have been as follows:
Dividend Rates
---------------------------------
1996 1995 1994
---- ---- ----
First quarter 1.6 % 1.5 % 1.1 %
Second quarter 1.6 % 1.5 % 1.15 %
Third quarter 1.6 % 1.6 % 1.3 %
Fourth quarter 1.6 % 1.6 % 1.4 %
----- ------ ------
Total 6.4 % 6.2 % 4.95 %
====== ====== ======
Compounded Total 6.56% 6.35% 5.04 %
====== ====== ======
|
Annualized stock dividend cash equivalent rates considered by the Company's Board of Directors in declaring stock dividends for 1996, 1995 and 1994, respectively, were 71 3/4, 67 3/4 and 64 5/8 per share (adjusted for all stock dividends paid subsequent to all dividends declared through December 31, 1996 and rounded to the nearest 1/8th).
On January 30, 1995, the Company, pursuant to an underwritten public offering, issued 19,000,000 shares of its Common Stock Series A at an issuance price of $13 3/8 per share (not adjusted for subsequent stock dividends). The $244,200,000 of net proceeds from the issuance was used to permanently fund a portion of the acquisition of the GTE Telecommunications Properties.
In May 1996 and 1995, the Board of Director's authorized the buyback of up to $75 million and $50 million, respectively, of Common Stock Series A and Series B shares solely for purposes of funding the Company's stock dividend policy. Shares have been and will be purchased on the open market from time to time. The Company purchased 6,554,000 shares at a cost of $75,481,000 in 1996 and 1,865,000 shares at a cost of $22,028,000 in 1995. All purchased shares have been used to pay stock dividends.
The activity in shares of outstanding common stock for Series A and Series B during 1996, 1995 and 1994 is summarized as follows:
Number of Shares
----------------
Series A Series B
-------- --------
Balance at January 1, 1994 129,785,000 52,477,000
Acquisition 0 505,000
Common stock dividends 6,484,000 2,744,000
Stock plans 355,000 1,122,000
Conversion of Series A to Series B (2,278,000) 2,278,000
----------- ----------
Balance at December 31,1994 134,346,000 59,126,000
Acquisitions 0 888,000
Common stock issuance 19,000,000 0
Common stock dividends 9,499,000 4,098,000
Common stock buybacks to fund stock dividends (462,000) (1,403,000)
Stock plans 601,000 1,894,000
Conversions of Series A to Series B (7,626,000) 7,626,000
------------ ----------
Balance at December 31, 1995 155,358,000 72,229,000
Acquisition 1,289,000 0
Common stock dividends 9,819,000 4,984,000
Common stock issued to fund EPPICS dividends 710,000 0
Common stock buybacks to fund stock dividends (1,356,000) (5,198,000)
Stock plans 508,000 805,000
Conversions of Series A to Series B (11,086,000) 11,086,000
------------ -----------
Balance at December 31, 1996 155,242,000 83,906,000
============ ===========
|
The Company has 50,000,000 authorized but unissued shares of preferred stock ($.01 par).
1996 1995
---- ----
($ in thousands)
Net Income As reported $178,660 $159,536
Pro forma $177,426 $159,072
Earnings per share As reported $.77 $.69
Pro forma $.76 $.68
|
Pro forma net income reflects only the vested portion of options granted in 1996 and 1995. Therefore, the full impact of calculating compensation cost for stock options under SFAS 123 is not reflected in the pro forma amounts above because pro forma compensation cost only includes costs associated with the vested portion of options granted pursuant to the MEIP, EIP and ESPP on or after January 1, 1995.
The maximum number of shares of common stock which may be issued pursuant to awards at any time is 5% (11,957,000 as of December 31, 1996) of the Company's common stock outstanding . No awards will be granted more than 10 years after the effective date (June 22, 1990) of the MEIP. The exercise price of stock options and SARs shall be equal to or greater than the fair market value of the underlying common stock on the date of grant. Stock options are generally not exercisable on the date of grant but vest over a period of time.
Under the terms of the MEIP, subsequent stock dividends and stock splits have the effect of increasing the option shares outstanding, which correspondingly decreases the average exercise price of outstanding options.
The following summary of shares subject to option under the MEIP presents option share activity adjusted for subsequent stock dividends.
Shares Weighted
Subject to Average Option
Option Price Per Share
------ ---------------
Balance at January 1, 1994 6,808,000 $11.88
Options granted 1,770,000 11.53
Options exercised (169,000) 7.10
Options canceled or lapsed (78,000) 12.50
-------------
Balance at December 31, 1994 8,331,000 11.89
Options granted 105,000 10.38
Options exercised (276,000) 6.33
Options canceled or lapsed (115,000) 13.29
-------------
Balance at December 31, 1995 8,045,000 12.05
Options granted 2,842,000 11.44
Options exercised (361,000) 7.23
Options canceled or lapsed (558,000) 12.18
=============
Balance at December 31, 1996 9,968,000 $11.96
=============
|
The following table summarizes information about shares subject to options under the MEIP at December 31, 1996.
Options Outstanding Options Exercisable
---------------------------------------------------------- -------------------------------
Weighted- Average
Number Range of Weighted-Average Remaining Number Weighted-Average
Outstanding Exercise Prices Exercise Price Life in Years Exercisable Exercise Price
----------- --------------- -------------- ------------- ----------- --------------
26,000 $ 3 - 5 $ 4 3.8 26,000 $ 4
834,000 8 - 10 8 4.9 834,000 8
5,604,000 10 - 12 12 8.1 1,746,000 12
2,196,000 12 - 14 13 8.2 2,166,000 13
1,308,000 14 - 16 15 6.9 824,000 15
- - -------------- ------------
9,968,000 3 - 16 12 7.7 5,596,000 12
============== =============
|
The weighted-average fair value of options granted during 1996 and 1995 were $1.51 and $1.80, respectively. For purposes of the pro forma calculation under SFAS 123, the fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants in 1996 and 1995:
1996 1995
---- ----
Dividend yield 6.2% 5.6%
Expected volatility 20% 20%
Risk-free interest rate 5.63% 6.25%
Expected life 7 years 7 years
|
During 1996 and 1995, the Company granted restricted stock awards to key employees in the form of the Company's Common Stock Series B. There were no restricted stock award grants in 1994. The number of Series B shares issued as restricted stock awards during 1996 and 1995 were 522,322 and 9,831, respectively (adjusted for subsequent stock dividends). None of the restricted stock awards may be sold, assigned, pledged or otherwise transferred, voluntarily or involuntarily, by the employee until the restrictions lapse. The restrictions lapse over six-month through five-year periods. At December 31, 1996, 834,673 shares (adjusted for subsequent stock dividends and stock splits) of restricted stock were outstanding.
The maximum number of shares of common stock which may be issued pursuant to awards at any time is 11,300,000 shares. No awards will be granted more than 10 years after the effective date (May 23, 1996) of the EIP. The exercise price of stock options and SARs shall be equal to or greater than the fair market value of the underlying common stock on the date of grant. Stock options are generally not exercisable on the date of grant but vest over a period of time.
Under the terms of the EIP, subsequent stock dividends and stock splits have the effect of increasing the option shares outstanding, which correspondingly decrease the average exercise price of outstanding options. As of December 31, 1996, there have been no awards granted under the EIP.
1996 1995
---- ----
Dividend yield 6.4% 6.2%
Expected volatility 20% 20%
Risk-free interest rate 5.30% 5.56%
Expected life 6 months 6 months
|
The weighted-average fair value of those purchase rights granted in 1996 and 1995 was $3.20 and $3.27, respectively.
1996 1995 1994
----------- ----------- ------------
Consolidated tax provision at federal statutory rate 35.0% 35.0% 35.0%
State income tax provisions, net of federal income tax benefit 0.5% 2.1% 2.5%
Allowance for funds used during construction (2.0%) (2.3%) (2.4%)
Nontaxable investment income (1.7%) (1.7%) (2.9%)
Amortization of investment tax credits (0.7%) (0.9%) (0.9%)
All other - net 0.4% (2.7%) (0.4%)
----------- ----------- ------------
31.5% 29.5% 30.9%
=========== =========== ============
|
As of December 31, 1996, 1995 and 1994, accumulated deferred income taxes amounted to $334,117,000, $298,424,000 and $230,556,000, respectively, and the unamortized deferred investment tax credits amounted to $13,858,000, $15,670,000, and $17,594,000, respectively. Income taxes paid during the year were $22,525,000, $39,425,000, and $30,395,000 for 1996, 1995 and 1994, respectively.
The components of the net deferred income tax liability at December 31, are as follows:
1996 1995 1994
---- ---- ----
($ in thousands)
Deferred income tax liabilities:
--------------------------------
Property, plant and equipment basis differences $ 285,673 $ 246,128 $ 177,549
Regulatory assets 63,447 63,871 62,578
Other - net 14,469 22,741 28,704
----------- ---------- ----------
363,589 332,740 268,831
----------- ---------- ----------
Deferred income tax assets:
---------------------------
Regulatory liabilities 10,076 12,415 13,498
Deferred investment tax credits 5,538 6,231 7,183
----------- ---------- -----------
15,614 18,646 20,681
----------- ---------- -----------
Net deferred income tax liabitlity $ 347,975 $ 314,094 $ 248,150
=========== ========== ===========
|
The provision for federal and state income taxes, as well as the taxes charged or credited to Shareholders' equity, includes amounts both payable currently and deferred for payment in future periods as indicated below:
1996 1995 1994
---- ---- ----
($ in thousands)
Income taxes charged (credited) to the income statement
Current:
Federal $ 19,775 $ 13,297 $ 28,347
State (3,256) 1,014 3,595
----------
----------- ------------
Total current 16,519 14,311 31,942
---------- ----------- ------------
Deferred:
Federal 64,895 48,168 29,829
Investment tax credits (1,865) (2,057) (1,949)
State 5,388 6,395 4,501
---------- ----------- ------------
Total deferred 68,418 52,506 32,381
---------- ----------- ------------
84,937 66,817 64,323
---------- ----------- ------------
Income tax benefit on dividends on convertible preferred securities
Current:
Federal (3,149) 0 0
State (479) 0 0
---------- ----------- ------------
Total (3,628) 0 0
---------- ----------- ------------
Income taxes charged to the income statement (a) 81,309 66,817 64,323
---------- ----------- ------------
Income taxes charged (credited) to shareholders' equity
- - ----------------------------------------------------------
Deferred income taxes (benefits) on unrealized gains or losses on securities
classified as available-for-sale (6,884) (3,052) 5,588
Current benefit arising from stock options exercised (345) (406) (137)
---------- ----------- ------------
Income taxes charged (credited) to shareholders' equity (b) (7,229) (3,458) 5,451
========== =========== ============
Total income taxes (a) plus (b) $ 74,080 $ 63,359 $ 69,774
========== =========== ============
|
The Company's alternative minimum tax credit as of December 31, 1996 is $65,056,000 which can be carried forward indefinitely to reduce future regular tax liability. Such amount is included as a debit against accrued income taxes.
Year Ended December 31,
-------------------------------------------
1996 1995 1994
---- ---- ----
($ in thousands)
Communications:
- - ---------------
Revenues $ 786,307 $ 616,747 $ 456,875
Operating income 206,537 174,196 148,720
Depreciation 153,571 120,608 81,659
Capital expenditures, net 225,648 141,063 173,225
Assets 2,412,382 2,097,277 1,805,893
Public Services:
- - ----------------
Natural gas:
------------
Revenues $ 239,619 $ 197,902 $ 208,940
Operating income 33,756 25,874 30,205
Depreciation 10,953 12,155 10,827
Capital expenditures, net 27,691 28,659 26,247
Assets 381,740 344,036 306,979
Electric:
---------
Revenues $ 192,297 $ 175,351 $ 167,940
Operating income 24,805 30,060 31,221
Depreciation 18,718 17,035 15,251
Capital expenditures, net 24,591 32,849 34,379
Assets 482,194 487,893 458,457
Water and Wastewater:
---------------------
Revenues $ 88,294 $ 79,032 $ 72,395
Operating income 30,588 24,043 17,978
Depreciation 10,491 9,137 7,438
Capital expenditures, net 21,048 27,958 22,276
Assets 511,628 505,851 455,312
|
Net Income
---------------------------------------------------
($ in thousands) Per Share
---------------- ----------------------------
1996 Revenues Amount Series A Series B
---- -------- ------ -------- --------
First quarter $329,138 $38,856 $.16 $.16
Second quarter 318,128 46,251 .19 .19
Third quarter 319,959 46,032 .20 .20
Fourth quarter 339,292 47,521 .20 .20
|
Net Income
---------------------------------------------------
($ in thousands) Per Share
---------------- -----------------------------
1995 Revenues Amount Series A Series B
---- -------- ------ -------- --------
First quarter $267,034 $33,903 $.15 $.15
Second quarter 251,678 41,939 .17 .17
Third quarter 259,732 45,061 .19 .19
Fourth quarter 290,588 38,633 .16 .16
|
The quarterly net income per share amounts are rounded to the nearest cent. Annual earnings per share may vary depending on the effect of such rounding.
1996 1995 1994
---- ---- ----
($ in thousands)
Net income $ 178,660 $ 159,536 $ 143,997
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation expense 193,733 158,935 115,175
Deferred income taxes and other current liabilities 68,418 52,506 32,381
Change in operating accounts payable 49,020 11,247 21,520
SFAS 121 noncash charge 17,321 0 0
Change in operating accounts receivable (46,342) (22,684) (20,663)
Change in other assets (27,979) (8,557) 14,054
HTCC noncash investment income (21,692) 0 0
Centennial noncash investment income (8,993) (14,353) (13,481)
Allowance for equity funds used during construction (8,704) (10,545) (11,402)
Change in accrued taxes and interest (4,997) (6,923) 13,024
Other (13,264) 19,449 (32,289)
----------- ----------- -----------
Net cash provided by operating activities $ 375,181 $ 338,611 $ 262,316
=========== =========== ============
|
In conjunction with the acquisitions of the ALLTEL Telecommunications Properties, the Company assumed debt of $13,000,000 and $41,447,000, in 1996 and 1995, respectively, at weighted average interest rates of 8.05% and 6.59%, respectively.
Pension costs for 1996, 1995 and 1994 are comprised of the following components:
1996 1995 1994
---- ---- ----
($ in thousands)
Service cost $ 7,896 $ 6,549 $ 5,777
Interest cost on projected benefit obligation 11,309 10,735 8,166
Return on plan assets (11,268) (11,784) (9,754)
Net amortization and deferral 488 335 172
========== ========== ===========
Net pension cost $ 8,425 $ 5,835 $ 4,361
========== ========== ===========
|
The following table sets forth the plan's benefit obligations and fair values of plan assets as of December 31, 1996, 1995 and 1994.
1996 1995 1994
---- ---- ----
($ in thousands)
Projected benefit obligation $ (151,507) $ (145,008) $ (125,943)
=========== ============ =============
Accumulated benefit obligation:
Vested $ (87,089) $ (86,260) $ (77,053)
Non vested (9,886) (14,107) (9,133)
=========== ============ =============
Total accumulated benefit obligation $ (96,975) $ (100,367) $ (86,186)
=========== ============ =============
Plan assets at fair value $ 151,100 $ 133,700 $ 133,964
=========== ============ =============
|
Assumptions used in the computation of pension costs/ year end benefit obligations were as follows:
1996 1995 1994
---- ---- ----
Discount rate 7.5%/ 8.0% 8.25%/ 7.5% 8.0%/ 8.0%
Expected long-term rate of return on plan assets 8.0%/ N/A 8.75%/ N/A 8.5%/ N/A
Rate of increase in compensation levels 4.0%/ 4.0% 4.5 %/ 4.0% 4.5%/ 4.5%
|
The Company provides certain medical, dental and life insurance benefits for retired employees and their beneficiaries and covered dependents. The components of the net periodic postretirement benefit costs for the years ended December 31, 1996, 1995 and 1994 are as follows:
1996 1995 1994
---- ---- ----
($ in thousands)
Service cost $ 1,786 $ 2 ,038 $ 1,826
Interest cost on the projected benefit 3,692 4,023 3,418
obligation
Amortization of transition obligation 1,038 1,038 1,048
Other (489) 467 313
--------- --------- --------
Net periodic postretirement benefit cost $ 6,027 $ 7,566 $ 6,605
========= ========= ========
|
Of the net periodic postretirement benefit cost presented above, the Company recorded $2,529,000, $2,781,000 and $4,621,000 in 1996, 1995 and 1994, respectively, as regulatory assets for states whose regulatory commissions to date have not but will likely allow recovery of accrued costs in future rate proceedings. The Company's annual cost includes 20-year prospective recognition of the transition obligation.
The following table sets forth the plan's benefit obligations and the postretirement benefit liability recognized on the Company's balance sheets at December 31, 1996, 1995 and 1994:
1996 1995 1994
---- ---- ----
($ in thousands)
Accumulated postretirement benefit obligation:
Retirees $ (18,990) $ (19,736) $ (14,946)
Fully eligible active plan participants (9,049) (9,964) (7,158)
Other active plan participants (21,876) (30,304) (32,882)
----------- ------------ -----------
Total accumulated postretirement benefit (49,915) (60,004) (54,986)
obligation
Plan assets at fair value 3,156 912 0
Unrecognized transition obligation 16,600 17,638 18,676
Unrecognized prior service cost 4,615 3,480 2,932
Unrecognized net (gain) loss (17,570) (2,961) (1,914)
----------- ----------- -----------
Net accumulated postretirement benefit obligation $ (43,114) $ (40,935) $ (35,292)
=========== ============ ===========
|
For purposes of measuring year end benefit obligations, the Company used the same discount rates as were used for the pension plan and a 7% annual rate of increase in the per-capita cost of covered health-care benefits, gradually decreasing to 5% in the year 2040 and remaining at that level thereafter. The effect of a 1% increase in the assumed health-care cost trend rates for each future year on the aggregate of the service and interest cost components of the total postretirement benefit cost would be $548,000 and the effect on the accumulated postretirement benefit obligation for health benefits would be $4,991,000.
The Company conducts certain of its operations in leased premises and also leases certain equipment and other assets pursuant to operating leases. Terms of the leases, including purchase options and obligations, renewals and maintenance costs, vary by lease.
Future minimum rental commitments for all long-term noncancellable operating leases are as follows:
Year Amount
1997 $18,197,000
1998 19,836,000
1999 14,035,000
2000 14,183,000
2001 6,382,000
2002 to 2020 18,869,000
----------
Total $91,502,000
|
Total rental expense included in the Company's results of operations for the years ended December 31, 1996, 1995 and 1994 was $13,146,000, $6,778,000, and $3,913,000 respectively.
The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company's consolidated financial position, results of operations or liquidity.
SEVENTH SUPPLEMENTAL INDENTURE, dated as of June 1, 1996, between CITIZENS UTILITIES COMPANY, a corporation duly organized and existing under the laws of the State of Delaware (herein called the "Company"), having its principal administrative offices at High Ridge Park, Building No. 3, Stamford, Connecticut 06905, to CHEMICAL BANK, a New York banking corporation, as Trustee (herein called the "Trustee"), having its principal corporate trust office at 450 West 33rd Street, New York, New York 10001.
RECITALS
WHEREAS, the Company has entered into an Indenture dated as of August
15, 1991 (the "Indenture"), with the Trustee to provide for the issuance from
time to time of the Company's debentures, notes or other evidences of
indebtedness (herein called the "Securities"), to be issued in one or more
series; and
WHEREAS, the Company has entered into a First Supplemental Indenture
dated as of August 15, 1991 (the "First Supplemental Indenture") with the
Trustee to establish the form and terms of a series of Securities designated
"8.45% Debentures Due 2001"; and
WHEREAS, the Company has entered into a Second Supplemental Indenture
dated as of January 15, 1992 (the "Second Supplemental Indenture") with the
Trustee to establish the form and terms of a series of Securities designated
"7.45% Debentures Due 2004";and
WHEREAS, the Company has entered into a Third Supplemental Indenture
dated as of April 15, 1994 (the "Third Supplemental Indenture") with the Trustee
to establish the form and terms of a series of Securities designated "7.60%
Debentures Due 2006"; and
WHEREAS, the Company has entered into a Fourth Supplemental Indenture
dated as of October 1, 1994 (the "Fourth Supplemental Indenture") with the
Trustee to establish the form and terms of a series of Securities designated
"7.68% Debentures Due 2034"; and
WHEREAS, the Company has entered into a Fifth Supplemental Indenture
dated as of June 15, 1995 (the "Fifth Supplemental Indenture") with the Trustee
to establish the form and terms of a series of Securities designated "7.45%
Debentures Due 2035"; and
WHEREAS, the Company has entered into a Sixth Supplemental Indenture
dated as of October 15, 1995 (the "Sixth Supplemental Indenture") with the
Trustee to establish the form and terms of a series of Securities designated "7%
Debentures Due 2025"; and
WHEREAS, Section 901 of the Indenture provides, among other things,
that the Company and the Trustee may enter into indentures supplemental to the
Indenture for, among other things, the purpose of establishing the form and
terms of the Securities of any series as permitted in Sections 201 and 301 of
the Indenture and adding to the covenants of the Company for the benefit of the
Holders of any series of Securities; and
WHEREAS, the Company by corporate action duly taken has authorized the
issuance of a seventh series of Securities designated as the 6.80% Debentures
Due 2026 (hereinafter sometimes called the "Debentures"), which series is
limited in aggregate principal amount to $100,000,000, such Debentures to
contain such provisions as have been caused to be determined by or at the
direction of, the Board of Directors of the Company and as are set forth in this
Seventh Supplemental Indenture to the Indenture; and
WHEREAS, all conditions have been complied with, all actions have been
taken and all things have been done which are necessary to make the Debentures,
when executed by the Company and authenticated by or on behalf of the Trustee
and when delivered as herein and in the Indenture provided, the valid
obligations of the Company, and to make this Seventh Supplemental Indenture a
valid and binding supplemental indenture.
NOW, THEREFORE, THIS SEVENTH SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Debentures by the holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all holders of the Debentures, as follows:
(2) the words "herein", "hereof" and "hereto" and other words
of similar import used in this Seventh Supplemental Indenture
refer to this Seventh Supplemental Indenture as a whole and
not to any particular Section or other subdivision of this
Seventh Supplemental Indenture;
(3) the provisions of this Seventh Supplemental Indenture shall
be read in conjunction with the provisions of the Indenture
only with respect to the Debentures and the provisions of the
Indenture and the First, Second, Third, Fourth, Fifth and
Sixth Supplemental Indentures shall not be modified by this
Seventh Supplemental Indenture with respect to any series of
the Securities outstanding or to be outstanding under the
Indenture, other than the Debentures; and
(4) terms defined in this Sevent Supplemental Indenture shall
apply only to this Seventh Supplemental Indenture
(2) the Debentures shall constitute a single series of the
Securities under the Indenture, which series is limited in aggregate principal
amount to $100,000,000;
(3) so long as any Debentures are registered in the name of
CEDE & Co., or any other nominee of The Depository Trust Company, and are
intended to be Book-Entry Securities, the provisions of Section 311 of the
Indenture shall apply to such Debentures. Thereafter the Debentures may be
subjected to the requirements of a successor book-entry securities system that
may be adopted by the Company in accordance with the provisions of the Indenture
and this Seventh Supplemental Indenture;
(4) interest on each of the Debentures shall be payable at the
rate per annum specified in the designation of the Debenture from June 11, 1996,
or from the most recent Interest Payment Date to which interest has been paid or
duly provided for, semi-annually, on February 15 and August 15 in each year,
commencing on August 15, 1996. The interest so payable, and punctually paid or
duly provided for, on any Interest Payment Date will be paid to the Person in
whose name such Debenture (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest, which
shall be the February 1 or August 1 (whether or not a Business Day), as the case
may be, next preceding such Interest Payment
Date. Any interest not so punctually paid or duly provided for will forthwith
cease to be payable to the Holder on such Regular Record Date by virtue of
having been such a Holder and shall be paid by the Company as provided in
Section 307 of the Indenture;
(5) unless otherwise provided with respect to a Book-Entry
Security or pursuant to any successor book-entry security system or similar
system, payments of interest will be made by check mailed to the Holder of each
Debenture at the address shown in the Security Register or, at the option of the
Holder, to such other place in the United States of America as the Holder shall
designate to the Trustee in writing. The principal amount of the Debentures will
be paid at Maturity by check against presentation of the Debentures at the
office or agency of Chemical Bank, as Trustee, in New York, New York, or such
other address in New York, New York, as the Trustee shall designate by written
notice to the Holders of the Debentures;
(6) the Debentures shall be issued in registered form only and
in denominations of $1,000 or any amount in excess thereof which is an integral
multiple of $1,000;
(7) principal and interest on the Debentures shall be payable
in the coin or currency of the United States of America, which, at the time of
payment, is legal tender for public and private debts; and
(c) On or before the Redemption Date, the Company shall
deposit with the Trustee an amount of money sufficient to pay the Redemption
Price of, and (except if the Redemption Date shall be an Interest Payment Date)
accrued interest on, all the Debentures which are to be repurchased on that
date.
(d) If any Debenture surrendered for redemption shall not be
so paid on the Redemption Date, such Debenture shall, until paid, continue to
bear interest to the extent permitted by applicable law from the Redemption Date
at the same rate as the rate borne by such Debenture. The Company shall pay to
the Holder of such Debenture the additional amounts of interest arising from
this subsection at the same time that it pays the Redemption Price.
(e) If any Debenture which is to be redeemed only in part
shall be surrendered at any office or agency of the Company (with, if the
Company or the Trustee so requires, due endorsement by, or a written instrument
of transfer in form satisfactory to the Company and the Trustee duly executed
by, the Holder thereof or his attorney duly authorized in writing), the Company
shall execute, and the Trustee shall authenticate and deliver to the Holder of
such Security without service charge, a new Debenture or Debentures, of any
authorized denomination as requested by such Holder, in an aggregate principal
amount equal to and in
exchange for the unredeemed portion of the Debenture so surrendered.
requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or"
For all purposes of the Debentures and for no other purposes, the first
paragraph of Section 502 shall read:
"If an Event of Default with respect to Securities of any
series at the time Outstanding occurs and is continuing, then
and in every such case the Trustee or the Holders of a
majority in principal amount of the Outstanding Securities of
that series may declare the principal amount (or, if any of
the Securities of that series are Original Issue Discount
Securities, such portion of the principal amount of such
Securities as may be specified in the terms thereof) of all of
the Securities of that series to be due and payable
immediately, by a notice in writing to the Company (and to the
Trustee if given by Holders), and upon any such declaration
such principal amount (or specified amount) shall become
immediately due and payable."
For all purposes of the Debentures and for no other purposes,
subsection (2) of Section 507 shall read:
"(2) the Holders of a majority in principal amount of the
Outstanding Securities of that series shall have made written
request to the Trustee to institute proceedings in respect of
such Event of Default in its own name as Trustee hereunder;"
For all purposes of the Debentures and for no other purposes,
subsection (5) of Section 507 shall read:
"(5) no direction inconsistent with such written request has
been given to the Trustee during such 90-day period by the
Holders of 66-2/3% in principal amount of the Outstanding
Securities of that series."
Fifth Supplemental Indenture and Sixth Supplemental Indenture and as hereby supplemented by this Seventh Supplemental Indenture, and agrees to perform the same upon the terms and conditions in the Indenture, as so supplemented.
IN WITNESS WHEREOF, the parties hereto have caused this Seventh Supplemental Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the date first above written.
CITIZENS UTILITIES COMPANY
By: /s/Robert J. DeSantis
---------------------
Title: Vice President and
Treasurer
Attest:
/s/Charles J. Weiss
- - --------------------------
Secretary
|
CHEMICAL BANK, as Trustee
By: /s/Thomas J. Foley
------------------
Title: Vice President
Attest:
|
County of Fairfield )
) ss.:
State of Connecticut )
On the 11th day of June, 1996, before me personally came Robert DeSantis, to me known, who, being by me duly sworn, did depose and say that he is Vice President and Treasurer of CITIZENS UTILITIES COMPANY, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporations; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority.
County of New York )
) ss.:
State of New York )
IN WITNESS WHEREOF I have hereunder set my hand and affixed my official seal, at New York in said State of New York, the day and year first above written.
EXECUTION COPY
CITIZENS UTILITIES COMPANY
TO
CHEMICAL BANK
(Trustee)
SEVENTH SUPPLEMENTAL INDENTURE
Dated as of June 1, 1996
Supplemental to the Indenture
Dated as of August 15, 1991
EIGHTH SUPPLEMENTAL INDENTURE, dated as of December 1, 1996, between
CITIZENS UTILITIES COMPANY, a corporation duly organized and existing under the
laws of the State of Delaware (herein called the "Company"), having its
principal administrative offices at High Ridge Park, Building No. 3, Stamford,
Connecticut 06905, to THE CHASE MANHATTAN BANK (formerly known as Chemical
Bank), a New York banking corporation, as Trustee (herein called the "Trustee"),
having its principal corporate trust office at 450 West 33rd Street, New York,
New York 10001.
RECITALS
WHEREAS, the Company has entered into an Indenture dated as of August
15, 1991 (the "Indenture"), with the Trustee to provide for the issuance from
time to time of the Company's debentures, notes or other evidences of
indebtedness (herein called the "Securities"), to be issued in one or more
series; and
WHEREAS, the Company has entered into a First Supplemental Indenture
dated as of August 15, 1991 (the "First Supplemental Indenture") with the
Trustee to establish the form and terms of a series of Securities designated
"8.45% Debentures Due 2001"; and
WHEREAS, the Company has entered into a Second Supplemental Indenture
dated as of January 15, 1992 (the "Second Supplemental Indenture") with the
Trustee to establish the form and terms of a series of Securities designated
"7.45% Debentures Due 2004"; and
WHEREAS, the Company has entered into a Third Supplemental Indenture
dated as of April 15, 1994 (the "Third Supplemental Indenture") with the Trustee
to establish the form and terms of a series of Securities designated "7.60%
Debentures Due 2006"; and
WHEREAS, the Company has entered into a Fourth Supplemental Indenture
dated as of October 1, 1994 (the "Fourth Supplemental Indenture") with the
Trustee to establish the form and terms of a series of Securities designated
"7.68% Debentures Due 2034"; and
WHEREAS, the Company has entered into a Fifth Supplemental Indenture
dated as of June 15, 1995 (the "Fifth Supplemental Indenture") with the Trustee
to establish the form and terms of a series of Securities designated "7.45%
Debentures Due 2035"; and
WHEREAS, the Company has entered into a Sixth Supplemental Indenture
dated as of October 15, 1995 (the "Sixth Supplemental Indenture") with the
Trustee to establish the form and terms of a series of Securities designated "7%
Debentures Due 2025"; and
WHEREAS, the Company has entered into a Seventh Supplemental Indenture
dated as of June 1, 1996 (the "Seventh Supplemental Indenture") with the Trustee
to establish the form and terms of a series of Securities designated "6.80%
Debentures Due 2026"; and
WHEREAS, Section 901 of the Indenture provides, among other things,
that the Company and the Trustee may enter into indentures supplemental to the
Indenture for, among other things,
the purpose of establishing the form and terms of the Securities of any series
as permitted in Sections 201 and 301 of the Indenture and adding to the
covenants of the Company for the benefit of the Holders of any series of
Securities; and
WHEREAS, the Company by corporate action duly taken has authorized the
issuance of an eighth series of Securities designated as the 7.05% Debentures
Due 2046 (hereinafter sometimes called the "Debentures"), which series is
limited in aggregate principal amount to $200,000,000, such Debentures to
contain such provisions as have been caused to be determined by or at the
direction of, the Board of Directors of the Company and as are set forth in this
Eighth Supplemental Indenture to the Indenture; and
WHEREAS, all conditions have been complied with, all actions have been
taken and all things have been done which are necessary to make the Debentures,
when executed by the Company and authenticated by or on behalf of the Trustee
and when delivered as herein and in the Indenture provided, the valid
obligations of the Company, and to make this Eighth Supplemental Indenture a
valid and binding supplemental indenture.
NOW, THEREFORE, THIS EIGHTH SUPPLEMENTAL INDENTURE WITNESSETH:
(1) the Securities to be issued under the Indenture and this
Eighth Supplemental Indenture shall be the Debentures and shall be designated as
the "7.05% Debentures Due 2046";
(2) the Debentures shall constitute a single series of the
Securities under the Indenture, which series is limited in aggregate principal
amount to $200,000,000;
(3) so long as any Debentures are registered in the name of
CEDE & Co., or any other nominee of The Depository Trust Company, and are
intended to be Book-Entry Securities, the provisions of Section 311 of the
Indenture shall apply to such Debentures. Thereafter the Debentures may be
subjected to the requirements of a successor book-entry securities system that
may be adopted by the Company in accordance with the provisions of the Indenture
and this Eighth Supplemental Indenture;
(4) interest on each of the Debentures shall be payable at the
rate per annum specified in the designation of the Debenture from December 6,
1996, or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, semi-annually, on April 1 and October 1 in each year,
commencing on April 1, 1997. The interest so payable, and punctually paid or
duly provided for, on any Interest Payment Date will be paid to the Person in
whose name such Debenture (or one or more Predecessor Securities) is registered
at the close of
business on the Regular Record Date for such interest, which shall be the March
15 or September 15 (whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date. Any interest not so punctually paid or
duly provided for will forthwith cease to be payable to the Holder on such
Regular Record Date by virtue of having been such a Holder and shall be paid by
the Company as provided in Section 307 of the Indenture;
(5) unless otherwise provided with respect to a Book- Entry
Security or pursuant to any successor book-entry security system or similar
system, payments of interest will be made by check mailed to the Holder of each
Debenture at the address shown in the Security Register or, at the option of the
Holder, to such other place in the United States of America as the Holder shall
designate to the Trustee in writing. The principal amount of the Debentures will
be paid at Maturity by check against presentation of the Debentures at the
office or agency of The Chase Manhattan Bank, as Trustee, in New York, New York,
or such other address in New York, New York, as the Trustee shall designate by
written notice to the Holders of the Debentures;
(6) the Debentures shall be issued in registered form only and
in denominations of $1,000 or any amount in excess thereof which is an integral
multiple of $1,000;
whose breach is elsewhere in this Section specifically dealt
with or which has expressly been included in this Indenture
solely for the benefit of a series of Securities other than
that series), and continuance of such default or breach for a
period of 90 days after there has been given, by registered or
certified mail, to the Company by the Trustee or to the
Company and the Trustee by the Holders of a majority in
principal amount of the Outstanding Securities of that series
a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a
"Notice of Default" hereunder; or"
For all purposes of the Debentures and for no other purposes, the
first paragraph of Section 502 shall read:
"If an Event of Default with respect to Securities of any
series at the time Outstanding occurs and is continuing, then
and in every such case the Trustee or the Holders of a
majority in principal amount of
the Outstanding Securities of that series may declare the
principal amount (or, if any of the Securities of that series
are Original Issue Discount Securities, such portion of the
principal amount of such Securities as may be specified in the
terms thereof) of all of the Securities of that series to be
due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by Holders), and upon any
such declaration such principal amount (or specified amount)
shall become immediately due and payable."
For all purposes of the Debentures and for no other purposes,
subsection (2) of Section 507 shall read:
"(2) the Holders of a majority in principal amount of the
Outstanding Securities of that series shall have made written
request to the Trustee to institute proceedings in respect of
such Event of Default in its own name as Trustee hereunder;"
For all purposes of the Debentures and for no other purposes,
subsection (5) of Section 507 shall read:
such counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Eighth Supplemental Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the date first above written.
CITIZENS UTILITIES COMPANY
By: /s/ Robert J. DeSantis
-----------------------
Title: Vice President and
Treasurer
Attest:
/s/Edward O. Kipperman
- - ----------------------
Edward O. Kipperman
Vice President, Tax
|
THE CHASE MANHATTAN BANK,
as Trustee
By: /s/ Thomas J. Foley
--------------------
Title: Vice President
Attest:
/s/R. Lorenze
- - -------------
|
County of Fairfield )
) ss.:
State of Connecticut )
On the 5th day of December, 1996, before me personally came Robert DeSantis, to me known, who, being by me duly sworn, did depose and say that he is Vice President and Treasurer of CITIZENS UTILITIES COMPANY, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority.
County of New York )
) ss.:
State of New York )
On this 5th day of December, in the year of 1996 before me personally came Thomas Foley, to me personally known, who being by me duly sworn did depose and say that he resides at Bethpage, New York, that he is Vice President of The Chase Manhattan Bank, one of the corporations described in and which executed the foregoing indenture; that he knows the seal of said corporation; that the seal affixed to said instrument opposite the execution thereof on behalf of said corporation is the corporate seal of said corporation; that said instrument was signed and said corporate seal was so affixed on behalf of said corporation by authority and order of its board of directors; that he signed his name thereto by like authority; and he acknowledged said instrument to be his free act and deed and the free act and deed of said Bank.
IN WITNESS WHEREOF I have hereunder set my hand and affixed my official seal, at New York in said State of New York, the day and year first above written.
EXECUTION COPY
CITIZENS UTILITIES COMPANY
TO
THE CHASE MANHATTAN BANK
(Trustee)
EIGHTH SUPPLEMENTAL INDENTURE
Dated as of December 1, 1996
Supplemental to the Indenture
Dated as of August 15, 1991
EXHIBIT No. 12
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
Statement Showing Computation of Ratio of Earnings to Fixed Charges and Earnings to Combined Fixed Charges for the year ended December 31, 1996
(DOLLARS IN THOUSANDS)
Ration of
Ration of Earnings to
Earnings to Combined Fixed
Fixed Charges Charges
-----------------------------------
Net Income (A) $178,660 $178,660
Dividends on convertible preferred securities,net of income tax benefit (B) 5,849 0
-----------------------------------
(A+B) (C) 184,509 178,660
Taxes based on income or profits (D) 84,937 81,309
-----------------------------------
Earnings, before income taxes and fixed charges (C+D) (E) 269,446 259,969
Fixed Charges (F) 101,332 110,809
-----------------------------------
Earnings before income taxes and fixed charges (E + F) (G) $370,778 $370,778
Ratio of Pre-tax Income to Net Income (E / C) 1.46 1.46
Ratio of Earning to Fixed Charges (G/F) 3.66 3.35
|
EXHIBIT NO. 21
21. SUBSIDIARIES (all wholly-owned, except where State of otherwise indicated) Incorporation
Name
AAlert Paging Company Delaware
Subsidiaries of AAlert Paging Company:
AAlert Paging Company of Sacramento California
AAlert Paging Company of San Diego California
AAlert Paging Company of San Francisco California
Citizens Business Services Company Illinois
Citizens Cable Company Delaware
Citizens Conference Call Company Delaware
Citizens Consumers Services, Inc. California
Citizens Directory Services Company L.L.C. Delaware*
Citizens Directory Services Company, Inc. Delaware
Citizens International Management Services Company Delaware
Citizens Mohave Cellular Company Delaware
Citizens Mountain State Telephone Company West Virginia
Citizens Public Works Service Company Delaware
Citizens Resources Company Delaware
Citizens Telecom Services Company L.L.C. Delaware*
Citizens Telecommunications Company Delaware
Citizens Telecommunications Company of Arizona L.L.C. Delaware*
Citizens Telecommunications Company of California, Inc. California
Citizens Telecommunications Company of Idaho Delaware
Citizens Telecommunications Company of Montana Delaware
Citizens Telecommunications Company of Nevada Nevada
Citizens Telecommunications Company of New York, Inc. New York
Citizens Telecommunications Company of Ogden, Inc. New York
Citizens Telecommunications Company of Oregon Delaware
Citizens Telecommunications Company of Tennessee L.L.C. Delaware*
Citizens Telecommunications Company of the Golden State California
Citizens Telecommunications Company of the Navajo Nation L.L.C. Delaware*
|
Citizens Telecommunications Company of the Volunteer State L.L.C. Delaware* Citizens Telecommunications Company of the White Mountains L.L.C. Delaware* Citizens Telecommunications Company of the White Mountains, Inc. Delaware
Citizens Telecommunications Company of Tuolumne California Citizens Telecommunications Company of Utah Delaware Citizens Telecommunications Company of West Virginia Delaware Citizens Utilities Company of California California Citizens Utilities Company of Illinois Illinois Citizens Utilities Company of Ohio Ohio Citizens Utilities Company of Pennsylvania Pennsylvania Citizens Utilities Rural Company Delaware Citizens Utilities Water Company of Pennsylvania Delaware Citizens Water Resources Company Illinois CU CapitalCorp Delaware Subsidiary of CU CapitalCorp: Electric Lightwave, Inc. Delaware Subsidiary of Electric Lightwave, Inc.: Telecard Services International, Inc. Delaware CU Wireless Management L.L.C. Delaware* Electric Energy Export Corp. Arizona Flowing Wells, Inc. Indiana Havasu Water Company, Inc. Arizona LGS Concord Corporation Minnesota LGS Natural Gas Company Louisiana LGS Securities, Inc. Louisiana Navajo Communications Company, Inc. New Mexico NCC Systems, Inc. Texas Southwestern Capital Corporation Delaware Southwestern Investments, Inc. Nevada Sun City Sewer Company Arizona Sun City Water Company Arizona Sun City West Utilities Company Arizona Tubac Valley Water Company, Inc. Arizona |
* Formed in the state of Delaware.
The Board of Directors
Citizens Utilities Company:
We consent to the incorporation by reference in the Registration Statement (No. 33-37602) on Form S-8, in the Registration Statement (No. 33-39566) on Form S-8, in the Registration Statement (No. 33-39455) on Form S-8, in the Registration Statement (No. 33-41682) on Form S-8, in the Registration Statement (No. 33-42972) on Form S-8, in the Registration Statement (No. 33-48683) on Form S-8, in the Registration Statement (No. 33-54376) on Form S-8, in the Registration Statement (No. 33-44069) on Form S-3, in the Registration Statement (No. 33-44068) on Form S-3, in the Registration Statement (No. 33-51529) on Form S-3, in the Registration Statement (No. 33-55075) on Form S-3, in the Registration Statement (No. 33-52873) on Form S-3, and in the Registration Statement (No. 33-63615) on Form S-3, in the Registration Statement (No. 333-7047) on Form S-3 and in the Registration Statement (No. 333-18049) on Form S-3 of Citizens Utilities Company of our report dated February 28, 1997, relating to the consolidated balance sheets of Citizens Utilities Company and subsidiaries as of December 31, 1996, 1995, and 1994 and the related consolidated statements of income, shareholders' equity, and cash flows for the years then ended, which report appears in the December 31, 1996 annual report on Form 10-K of Citizens Utilities Company.
KPMG PEAT MARWICK LLP
New York, New York
February 28, 1997
EXHIBIT No. 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Citizens Utilities Company constitutes and appoints Robert J. DeSantis and Livingston E. Ross, jointly and severally, for him in any and all capacities to sign on Form 10-K for the fiscal year 1996 for Citizens Utilities Company, and any and all amendments to said Form 10-K, and to file the same, with the Securities and Exchange Commission, hereby ratifying and conforming all that each of said attorneys-in-fact, or his substitute or substitutes may do or cause to be done by virtue hereof.
/s/ Norman I. Botwinik
--------------------------
Norman I. Botwinik
February 18, 1997
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EXHIBIT No. 24
POWEROFATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Citizens Utilities Company constitutes and appoints Robert J. DeSantis and Livingston E. Ross, jointly and severally, for him in any and all capacities to sign on Form 10-K for the fiscal year 1996 for Citizens Utilities Company, and any and all amendments to said Form 10-K, and to file the same, with the Securities and Exchange Commission, hereby ratifying and conforming all that each of said attorneys-in-fact, or his substitute or substitutes may do or cause to be done by virtue hereof.
/s/ Aaron I. Fleischman
--------------------------
Aaron I. Fleischman
February 18, 1997
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EXHIBIT No. 24
POWEROFATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Citizens Utilities Company constitutes and appoints Robert J. DeSantis and Livingston E. Ross, jointly and severally, for him in any and all capacities to sign on Form 10-K for the fiscal year 1996 for Citizens Utilities Company, and any and all amendments to said Form 10-K, and to file the same, with the Securities and Exchange Commission, hereby ratifying and conforming all that each of said attorneys-in-fact, or his substitute or substitutes may do or cause to be done by virtue hereof.
/s/ James C. Goodale
--------------------------
James C. Goodale
February 18, 1997
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EXHIBIT No. 24
POWEROFATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Citizens Utilities Company constitutes and appoints Robert J. DeSantis and Livingston E. Ross, jointly and severally, for him in any and all capacities to sign on Form 10-K for the fiscal year 1996 for Citizens Utilities Company, and any and all amendments to said Form 10-K, and to file the same, with the Securities and Exchange Commission, hereby ratifying and conforming all that each of said attorneys-in-fact, or his substitute or substitutes may do or cause to be done by virtue hereof.
/s/ Stanley Harfenist
--------------------------
Stanley Harfenist
February 18, 1997
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EXHIBIT No. 24
POWEROFATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Citizens Utilities Company constitutes and appoints Robert J. DeSantis and Livingston E. Ross, jointly and severally, for him in any and all capacities to sign on Form 10-K for the fiscal year 1996 for Citizens Utilities Company, and any and all amendments to said Form 10-K, and to file the same, with the Securities and Exchange Commission, hereby ratifying and conforming all that each of said attorneys-in-fact, or his substitute or substitutes may do or cause to be done by virtue hereof.
/s/ Andrew N. Heine
--------------------------
Andrew N. Heine
February 18, 1997
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EXHIBIT No. 24
POWEROFATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Citizens Utilities Company constitutes and appoints Robert J. DeSantis and Livingston E. Ross, jointly and severally, for him in any and all capacities to sign on Form 10-K for the fiscal year 1996 for Citizens Utilities Company, and any and all amendments to said Form 10-K, and to file the same, with the Securities and Exchange Commission, hereby ratifying and conforming all that each of said attorneys-in-fact, or his substitute or substitutes may do or cause to be done by virtue hereof.
/s/ Elwood A. Rickless
--------------------------
Elwood A. Rickless
February 18, 1997
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EXHIBIT No. 24
POWEROFATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Citizens Utilities Company constitutes and appoints Robert J. DeSantis and Livingston E. Ross, jointly and severally, for him in any and all capacities to sign on Form 10-K for the fiscal year 1996 for Citizens Utilities Company, and any and all amendments to said Form 10-K, and to file the same, with the Securities and Exchange Commission, hereby ratifying and conforming all that each of said attorneys-in-fact, or his substitute or substitutes may do or cause to be done by virtue hereof.
/s/ John L. Schroeder
--------------------------
John L. Schroeder
February 18, 1997
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EXHIBIT No. 24
POWEROFATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Citizens Utilities Company constitutes and appoints Robert J. DeSantis and Livingston E. Ross, jointly and severally, for him in any and all capacities to sign on Form 10-K for the fiscal year 1996 for Citizens Utilities Company, and any and all amendments to said Form 10-K, and to file the same, with the Securities and Exchange Commission, hereby ratifying and conforming all that each of said attorneys-in-fact, or his substitute or substitutes may do or cause to be done by virtue hereof.
/s/ Robert D. Siff
--------------------------
Robert D. Siff
February 18, 1997
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EXHIBIT No. 24
POWEROFATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Citizens Utilities Company constitutes and appoints Robert J. DeSantis and Livingston E. Ross, jointly and severally, for him in any and all capacities to sign on Form 10-K for the fiscal year 1996 for Citizens Utilities Company, and any and all amendments to said Form 10-K, and to file the same, with the Securities and Exchange Commission, hereby ratifying and conforming all that each of said attorneys-in-fact, or his substitute or substitutes may do or cause to be done by virtue hereof.
/s/ Robert A. Stanger
--------------------------
Robert A. Stanger
February 18, 1997
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EXHIBIT No. 24
POWEROFATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Citizens Utilities Company constitutes and appoints Robert J. DeSantis and Livingston E. Ross, jointly and severally, for him in any and all capacities to sign on Form 10-K for the fiscal year 1996 for Citizens Utilities Company, and any and all amendments to said Form 10-K, and to file the same, with the Securities and Exchange Commission, hereby ratifying and conforming all that each of said attorneys-in-fact, or his substitute or substitutes may do or cause to be done by virtue hereof.
/s/ Charles H. Symington, Jr.
-----------------------------
Charles H.Symington, Jr.
February 18, 1997
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EXHIBIT No. 24
POWEROFATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Citizens Utilities Company constitutes and appoints Robert J. DeSantis and Livingston E. Ross, jointly and severally, for him in any and all capacities to sign on Form 10-K for the fiscal year 1996 for Citizens Utilities Company, and any and all amendments to said Form 10-K, and to file the same, with the Securities and Exchange Commission, hereby ratifying and conforming all that each of said attorneys-in-fact, or his substitute or substitutes may do or cause to be done by virtue hereof.
/s/ Edwin Tornberg
--------------------------
Edwin Tornberg
February 18, 1997
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EXHIBIT No. 24
POWEROFATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Citizens Utilities Company constitutes and appoints Robert J. DeSantis and Livingston E. Ross, jointly and severally, for him in any and all capacities to sign on Form 10-K for the fiscal year 1996 for Citizens Utilities Company, and any and all amendments to said Form 10-K, and to file the same, with the Securities and Exchange Commission, hereby ratifying and conforming all that each of said attorneys-in-fact, or his substitute or substitutes may do or cause to be done by virtue hereof.
/s/ Leonard Tow
--------------------------
Leonard Tow
February 18, 1997
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EXHIBIT No. 24
POWEROFATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Citizens Utilities Company constitutes and appoints Robert J. DeSantis and Livingston E. Ross, jointly and severally, for her in any and all capacities to sign on Form 10-K for the fiscal year 1996 for Citizens Utilities Company, and any and all amendments to said Form 10-K, and to file the same, with the Securities and Exchange Commission, hereby ratifying and conforming all that each of said attorneys-in-fact, or his substitute or substitutes may do or cause to be done by virtue hereof.
/s/ Claire Tow
--------------------------
Claire Tow
February 18, 1997
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| ARTICLE UT |
| THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CITIZENS UTILITIES COMPANY AND SUBSIDIARIES' CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,1996 ABD IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. |
| CIK: 0000020520 |
| NAME: CITIZENS UTILITIES COMPANY |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | YEAR |
| FISCAL YEAR END | DEC 31 1996 |
| PERIOD END | DEC 31 1996 |
| BOOK VALUE | PER BOOK |
| TOTAL NET UTILITY PLANT | 3,138,052 |
| OTHER PROPERTY AND INVEST | 539,152 1 |
| TOTAL CURRENT ASSETS | 369,770 |
| TOTAL DEFERRED CHARGES | 174,196 2 |
| OTHER ASSETS | 301,978 3 |
| TOTAL ASSETS | 4,523,148 |
| COMMON | 59,788 |
| CAPITAL SURPLUS PAID IN | 1,381,341 |
| RETAINED EARNINGS | 244,066 |
| TOTAL COMMON STOCKHOLDERS EQ | 1,678,183 |
| PREFERRED MANDATORY | 201,250 4 |
| PREFERRED | 0 |
| LONG TERM DEBT NET | 1,509,697 |
| SHORT TERM NOTES | 0 |
| LONG TERM NOTES PAYABLE | 0 |
| COMMERCIAL PAPER OBLIGATIONS | 0 |
| LONG TERM DEBT CURRENT PORT | 3,593 |
| PREFERRED STOCK CURRENT | 0 |
| CAPITAL LEASE OBLIGATIONS | 0 |
| LEASES CURRENT | 0 |
| OTHER ITEMS CAPITAL AND LIAB | 2,640,122 |
| TOT CAPITALIZATION AND LIAB | 4,523,148 |
| GROSS OPERATING REVENUE | 1,306,517 |
| INCOME TAX EXPENSE | 84,937 |
| OTHER OPERATING EXPENSES | 221,104 5 |
| TOTAL OPERATING EXPENSES | 1,010,831 |
| OPERATING INCOME LOSS | 295,686 |
| OTHER INCOME NET | 66,455 |
| INCOME BEFORE INTEREST EXPEN | 362,141 |
| TOTAL INTEREST EXPENSE | 92,695 |
| NET INCOME | 178,660 |
| PREFERRED STOCK DIVIDENDS | 5,849 4 |
| EARNINGS AVAILABLE FOR COMM | 178,660 |
| COMMON STOCK DIVIDENDS | 0 |
| TOTAL INTEREST ON BONDS | 0 |
| CASH FLOW OPERATIONS | 375,181 |
| EPS PRIMARY | .77 |
| EPS DILUTED | .77 |
| 1 | REPRESENTS INVESTMENT FUNDS. |
| 2 | REPRESENTS REGULATORY ASSETS. |
| 3 | DEFERRED DEBITS AND OTHER ASSETS. |
| 4 | COMPANY OBLIGATED MADATORILY REDEEMABLE CONVERTIBLE PREFERRED SECURITIES OF A SUBSIDIARY TRUST, THE SOLE ASSETS OF WHICH ARE SECURITIES OF A SUBSIDIARY PARTNERSHIP, SUBSTANTIALLY ALL THE ASSETS OF WHICH ARE CONVERTIBLE DEBENTURES OF THE COMPANY. |
| 5 | REPRESENTS COMMODITIES PURCHASED |