CITIZENS UTILITIES COMPANY
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FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
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OF THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1994
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994 Commission file number 0-1291
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CITIZENS UTILITIES COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 06-0619596
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
High Ridge Park
P.O. Box 3801
Stamford, Connecticut 06905
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 329-8800
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NONE
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Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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
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Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of April 29, 1994.
Common Stock Series A 130,440,021
Common Stock Series B 53,848,532
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CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
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INDEX
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Page No.
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Part I. Financial Information
Consolidated Condensed Balance Sheets March 31, 1994
and December 31, 1993 2
Consolidated Condensed Statements of Income for
the Three Months Ended March 31, 1994 and 1993 3
Consolidated Condensed Statements of Cash Flows for
the Three Months Ended March 31, 1994 and 1993 4
Notes to Financial Statements 5
Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Part II. Other Information 7
Signature 8
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PART I. FINANCIAL INFORMATION
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CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
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CONSOLIDATED CONDENSED BALANCE SHEETS
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(In thousands)
March December
31, 1994 31, 1993
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ASSETS
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Current assets:
Cash and cash equivalents $ 25,217 $ 21,738
Temporary investments 115,974 89,752
Accounts receivable 114,081 114,313
Other 25,115 14,934
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280,387 240,737
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Property, plant and equipment 2,371,367 2,153,891
Less accumulated depreciation 665,357 461,924
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1,706,010 1,691,967
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Investments 390,192 411,022
Regulatory assets 141,996 146,207
Deferred debits and other assets 150,552 137,185
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$ 2,669,137 $2,627,118
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current liabilities:
Long-term debt due within one year $ 1,620 $ 1,620
Short-term debt 341,270 380,000
Other 247,379 246,605
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590,269 628,225
Customer advances for construction and
contributions in aid of construction 183,685 184,253
Deferred income taxes 223,911 213,471
Regulatory liabilities 27,911 28,376
Deferred credits and other liabilities 61,399 50,634
Long-term debt 563,819 547,673
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1,650,994 1,652,632
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Shareholders' equity:
Common stock issued, $.25 par value
Series A 32,652 32,447
Series B 13,420 13,119
Additional paid-in capital 734,173 698,688
Retained earnings 226,580 230,232
Unrealized gain on securities
classified as available for sale 11,318 0
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1,018,143 974,486
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$ 2,669,137 $2,627,118
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The accompanying Notes are an integral part of these Financial
Statements.
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PART I. FINANCIAL INFORMATION (Continued)
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CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
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CONSOLIDATED CONDENSED STATEMENTS OF INCOME
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FOR THE THREE MONTHS ENDED MARCH 31, 1994 AND 1993
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(In thousands, except per-share amounts)
1994 1993
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Revenues $223,896 $165,915
Expenses:
Operating expenses 151,534 113,235
Depreciation 25,401 14,165
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176,935 127,400
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Income from operations 46,961 38,515
Other income, net 11,906 9,116
Interest expense 13,137 10,222
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Income before income taxes 45,730 37,409
Income taxes 14,075 9,170
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Net income $ 31,655 $ 28,239
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Earnings per share of common stock:
Series A $ .17 $ .15*
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Series B $ .17 $ .15*
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Number of common shares outstanding at
March 31:
Series A Common Stock 130,615 129,105*
Series B Common Stock 53,672 47,174*
Dividends declared on common stock:
In Series A shares on Series A
Common Stock and in Series B shares
on Series B Common Stock
paid quarterly - rate 1.1% 1.2%
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*Adjusted for the August 1993 2-for-1 stock split.
The accompanying Notes are an integral part of these Financial
Statements.
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PART I. FINANCIAL INFORMATION (Continued)
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CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
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CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
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FOR THE THREE MONTHS ENDED MARCH 31, 1994 AND 1993
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(In thousands)
1994 1993
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Net cash provided by operating activities $49,134 $20,140
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Cash flows from investing activities:
Construction expenditures (47,235) (25,401)
Securities purchases (4,706) (71,127)
Securities sales 7,972 70,004
Securities maturities 12,340 23,777
Other, net 2,382 6,359
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(29,247) 3,612
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Cash flows from financing activities:
Long-term debt borrowings 22,476 33,936
Long-term debt principal payments (321) (9,408)
Short-term debt payments (38,730) 0
Other 167 779
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(16,408) 25,307
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Increase (decrease) in cash and cash
equivalents 3,479 49,059
Cash and cash equivalents at January 1, 21,738 19,752
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Cash and cash equivalents at March 31, $25,217 $68,811
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The accompanying Notes are an integral part of these Financial
Statements.
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PART I. FINANCIAL INFORMATION (Continued)
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CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
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NOTES TO FINANCIAL STATEMENTS
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(1) The consolidated financial statements include the accounts of Citizens
Utilities Company and all subsidiaries after elimination of intercompany
balances and transactions. All adjustments, which consist of only normal
recurring accruals, necessary for a fair statement of the results for the
interim periods have been made.
(2) Earnings per share is based on the average number of outstanding
shares, adjusted for intervening stock dividends and stock splits. Earnings
per share is presented for each Series separately, with historical adjustment
for stock dividends and stock splits for each Series. The effect on earnings
per share of outstanding stock options is immaterial.
(3) In accordance with applicable regulatory systems of account, an
allowance for funds used during construction is included in the cost of
additions to property, plant and equipment and is allowed in rate base for
rate making purposes. The allowance is not a cash item. The amount relating
to equity is included in Other income, net and the amount relating to
borrowings is offset against Interest expense.
(4) On December 22, 1993, Natural Gas Company of Louisiana ("NGL") was
merged into the company in a transaction accounted for as a pooling of
interests. The company's income statement and statement of cash flows at March
31, 1993 has been restated to include the results of NGLs' operations for the
three months ended March 31, 1993.
(5) Effective January 1, 1994, the company adopted Statements of Financial
Accounting Standards ("SFAS") No. 112 "Employers' Accounting for
Postretirement Benefits" and SFAS No. 115 "Accounting for Certain Investments
in Debt and Equity Securities". The company applied the provisions of these
accounting standards prospectively.
SFAS No. 112 requires the accrual of the expected costs of providing
benefits, if any, to former or inactive employees after termination of
employment for reasons other than retirement. Adoption of SFAS No. 112 did
not have a material effect on the Consolidated Financial Statements.
Adoption of SFAS No. 115 requires fair value reporting for certain
investments in debt and equity securities. Pursuant to the provisions of SFAS
115, the company classified its investments into two categories,
"held-to-maturity" ($445,876,000 at March 31, 1994) and "available-for-sale"
($42,581,000 at March 31, 1994). The company recorded unrealized holding gains
on securities classified as available-for-sale as an increase to investments.
Available for Sale Held to Maturity
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Aggregate fair value $ 60,290,000 $530,655,000
Gross unrealized holding gains 17,709,000 84,779,000
Amortized cost basis 42,581,000 445,876,000
Held to Maturity Securities
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Contractual Maturities Fair Value Amortized Cost
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Within 1 year $116,759,000 $115,974,000
2-5 years 239,447,000 236,563,000
6-10 years 19,752,000 19,249,000
Thereafter 154,697,000 74,090,000
There were no sales of securities classified as held-to-maturity. The
change in the net unrealized gains on available-for-sale securities that was
included in a separate component of shareholders' equity was $11,318,000. The
company does not invest in securities classified as trading securities. The
amortized cost and realized gains and losses on available-for-sale securities
sold during the three months ended March 31, 1994 were $7,972,000, $150,000
and ($21,000), respectively.
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PART I. FINANCIAL INFORMATION (Continued)
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CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
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Item 2. Management's Discussion and Analysis of Financial Condition and
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Results of Operations
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(a) Liquidity and Capital Resources
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For the three months ended March 31, 1994, the primary
source of funds was from operations. Funds requisitioned from
the 1993, 1992 and 1991 Series Industrial Development Revenue
Bond construction fund trust accounts were used to pay for
construction of utility plant. Commercial paper notes payable
in the amount of $400,223,000 were outstanding as of March 31,
1994, of which $341,270,000 is classified as short-term debt as
it represents the balance of the amount that was issued to
temporarily and partially fund the GTE Telephone Properties
acquired on December 31, 1993. The $341,270,000 of commercial
paper is expected to be repaid from maturing temporary
investments, funds from operations and proceeds from the planned
issuance of securities. On April 20, 1994, the company issued
$175,000,000 of debentures at par with an interest rate of 7.60%
and maturing on June 1, 2006. The proceeds from the sale of the
debentures were used to repay commercial paper notes outstanding
at March 31, 1994. 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
March 31, 1994. The increase is primarily due to the partial
repayment of short-term debt. The company has lines of credit
with commercial banks under which it may borrow up to
$1,200,000,000, there were no amounts outstanding under these
lines at March 31, 1994.
During the three months ended March 31, 1994, the company
was authorized net increases in annual revenues for properties
in California and Vermont totaling $2,246,000. The company has
requests for increases in annual revenues pending before
regulatory commissions in Arizona, California and Pennsylvania.
(b) Results of Operations
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Operating revenues for the three months ended March 31,
1994 increased compared to the like 1993 period primarily due
to increased telecommunications and natural gas revenues.
Telecommunications revenues totaled $84,731,000, a 94% increase
over the 1993 amount of $43,640,000. This increase was
primarily due to revenues derived from operating 189,000 local
telephone access lines in Idaho, Tennessee, Utah and West
Virginia acquired on December 31, 1993 from GTE Corp. Natural
gas revenues totaled $82,012,000, a 20% increase over the 1993
amount of $68,617,000. The increase was primarily due to
$4,989,000 from increased average revenue per MCF of gas sold
to residential and commercial customers and $8,347,000 from
increased consumption due to colder weather conditions.
Operating expenses for the three months ended March 31,
1994 increased compared to the like 1993 period primarily due
to increased natural gas purchased and telecommunications
operating expenses. Natural gas purchased totaled $49,247,000,
a 35% increase over the 1993 amount of $36,471,000 primarily due
to higher supplier prices and increased volume to satisfy
increased customer consumption. Operating and maintenance
expenses, depreciation expense and taxes other than income for
the three months ended March 31, 1994 increased compared to the
like 1993 period primarily due to operation of the 189,000 local
telephone access lines acquired from GTE Corp. on December 31,
1993.
Other income, net for the three months ended March 31, 1994
increased compared to the like 1993 period primarily due to an
increase in the allowance for funds used during construction as
a result of increased property, plant and equipment and the gain
on the sale of land.
Interest expense for the three months ended March 31, 1994
increased compared with the like 1993 period primarily as a
result of the interim financing of the acquisition of the
189,000 local telephone access lines acquired on December 31,
1993 with short-term debt, and an increase in industrial
development revenue bond borrowings. The increase in Interest
expense was partially offset by increased allowance for funds
used during construction, which is related to borrowings, as a
result of increased property plant and equipment. Income taxes
for the three months ended March 31, 1994 increased compared to
the like 1993 period primarily due to increased taxable income
and an increase in the federal income tax rate.
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PART II. OTHER INFORMATION
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CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
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Item 1. Legal Proceedings
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Reference is made to information describing certain legal matters
under Item 3 "Legal Proceedings" in the Company's Form 10-K for the year
ended December 31, 1993.
In May, 1994, the Delaware Court of Chancery granted the defendants'
motion for a stay of proceedings in the Thorpe and Biggs action referred
to in the third paragraph of Legal Proceedings in the company's 1993
Annual Report, Form 10-K, pending resolution of the settlement
proceedings referred to in the fourth paragraph of Legal Proceedings in
the company's 1993 Annual Report, Form 10-K.
In September 1992, the United States Environmental Protection Agency
filed a complaint with the United States District Court for the Northern
District of Illinois relating to alleged violations by the company's
Illinois subsidiary with respect to National Pollutant Discharge
Elimination System permit requirements. The parties are presently in
settlement discussions.
Item 6. Reports on Form 8-K
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(b)No Form 8-K was required during the three months ended March 31,
1994.
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CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
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SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CITIZENS UTILITIES COMPANY
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(Registrant)
Date May 13, 1994 By: Livingston E. Ross
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Livingston E. Ross
Vice President and Controller
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