PROSPECTUS SUPPLEMENT
(To Prospectus dated March 28, 1994)
17,000,000 Shares
Common Stock Series A
($.25 Par Value)
Of the 17,000,000 shares of Common Stock Series A of Citizens Utilities
Company (the "Company") being offered hereby, 15,300,000 shares are being
offered initially in the United States by the U.S. Underwriters and 1,700,000
shares are being offered initially outside of the United States by the
International Managers. Such offerings are collectively referred to as the
"Offerings." See "UNDERWRITING." The outstanding shares of Common Stock
Series A are, and the shares of Common Stock Series A offered hereby will be,
listed on the New York Stock Exchange under the symbol "CZNA." The reported
last sale price of the Company's Common Stock Series A on the New York Stock
Exchange on January 23, 1995, was $13 3/8 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE
Price to Public Underwriting Proceeds
Discount (1) to Company (2)
Per Share $13.375 $.52 $12.855
Total (3) $227,375,000 $8,840,000 $218,535,000
(1) The Company has agreed to indemnify the U.S. Underwriters and
International Managers against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "UNDERWRITING."
(2) Before deduction of expenses payable by the Company estimated at
$350,000.
(3) The Company has granted the U.S. Underwriters and International Managers
30-day options to purchase up to 2,295,000 and 255,000 additional shares
of Common Stock Series A, respectively, on the same terms as set forth
above to cover over-allotments, if any. If such options are exercised
in full, the total Price to Public, Underwriting Discount and Proceeds
to Company will be $261,481,250, $10,166,000, and $251,315,250,
respectively. See "UNDERWRITING."
The shares of Common Stock Series A offered hereby are being offered by
the U.S. Underwriters and International Managers named herein, subject to
prior sale, when, as and if accepted by the U.S. Underwriters and
International Managers subject to approval of certain legal matters by
counsel for the U.S. Underwriters and International Managers and subject to
certain conditions. It is expected that delivery of the shares of Common
Stock Series A offered hereby will be made in New York, NY on or about
January 30, 1995.
U.S. Underwriters offering shares in the United States
Merrill Lynch & Co.
Lehman Brothers
Morgan Stanley & Co.
Incorporated
Smith Barney Inc.
Robert W. Baird & Co.
Incorporated
International Managers offering shares outside of the United States
Merrill Lynch International Limited
Lehman Brothers
Morgan Stanley & Co.
International
NatWest Securities Limited
Smith Barney Inc.
The date of this Prospectus Supplement is January 23, 1995.
<PAGE>
IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY
OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE
OF THE COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY
BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934 are
incorporated into this Prospectus Supplement by reference in addition to the
documents incorporated by reference into the Prospectus:
The Company's Annual Report on Form 10-K for the year ended December 31,
1993, as amended on March 23 and March 25, 1994 by Forms 10-K/A and the
schedules to the Company's Annual Report on Form 10-K for the year ended
December 31, 1993, included in Form 10-K/A filed on April 28, 1994;
The Company's quarterly reports on Form 10-Q for the quarters ended March
31, June 30, and September 30, 1994;
The Company's Current Reports relating to the acquisitions of the GTE
Telephone Properties on Form 8-K filed on December 15, 1993 as amended by
Form 8-K/A on December 23, 1993 and on Forms 8-K filed July 5, July 15, and
August 9, 1994, and the Company's Current Reports relating to the
acquisitions of the Alltel Telephone Properties on Forms 8-K filed on
December 7, and December 21, 1994. See "RECENT DEVELOPMENTS."
The Company hereby undertakes to provide without charge to each person
to whom a copy of this Prospectus Supplement is delivered, upon written or
oral request of such person, a copy of any or all of the documents referred
to above which have been or may be incorporated by reference in this
Prospectus Supplement, other than exhibits to such documents not specifically
incorporated by reference herein. Requests for such copies should be
directed to Office of the Secretary, Citizens Utilities Company, High
Ridge Park, Bldg. No. 3, Stamford, Connecticut 06905 (telephone (203)
329-8800).
<PAGE>
The Offering
Company Citizens Utilities Company
Total Shares Offered
17,000,000 shares (15,300,000 shares in the United States by the U.S.
Underwriters and 1,700,000 shares outsdie of the United States by the
International Managers) of Common Stock Series A, $.25 par value (assuming
that the overallotment options are not exercised)
Listing New York Stock Exchange (Symbol: CZNA)
Common Stock Common Stock
Series A Series B
-------- --------
Common Stock Price Range
52 weeks ended January 23, 1995 $17 1/8 - $12 3/8 $17 1/8 - $12 3/8
Common Stock Closing Prices on
January 23, 1995 $13 3/8 $13 1/2
Common Stock Shares Outstanding on
December 15, 1994 132,716,059 57,966,408
1994 Stock Dividend Cash Equivalent
per share (see "Common Stock
Dividends" herein) $.74 1/4 $.74 1/4
1994 Stock Dividend Rate 4.95% 4.95%
Stock Dividend Sale Plan and Common
Stock Conversion
Common Stock Series A is convertible, on a share-for-share and tax-free
basis, into Common Stock Series B at all times. Common Stock Series B is not
convertible into Common Stock Series A. Holders of common Stock Series B
may elect to have their stock dividends sold and the net cash proceeds of the
sale distributed to them. See "Description of Common Stock" and "Stock
Dividend Sale Plan and Conversion of Common Stock Series A into Common Stock
Series B" herein.
Application of Proceeds
The net proceeds from the Sale of Common Stock Series A will be used to repay
outstanding short-term debt including short-term debt issued to partially
fund the acquisition of the GTE Telephone Properties described herein and in
the accompanying Prospectus, on such date or dates as the Company may
determine from time to time.<PAGE>
Consolidated Summary Financial Information
(In millions, except percentages and per share amounts)
Twelve Months Ended
September 30, 1994 Years Ended
December 31,
STATEMENT OF INCOME DATA Pro Forma (1) Actual 1993 1992 1991
--------- ------ ---- ---- ----
Revenues:
Telecommunications $ 696 $354 $177 $186 $198
Natural Gas 222 222 212 190 151
Electric 170 170 165 145 138
Water/Wastewater 71 71 65 59 58
----- --- --- --- ---
Total Revenues 1,159 817 619 580 545
Operating Expenses 850 614 458 429 396
----- ---- --- --- ---
Income from Operations 309 203 161 151 149
Other Income 35 56 54 47 40
Interest Expense 74 57 37 39 33
----- ---- --- --- ---
Income before Income Taxes 270 202 178 159 156
Income Taxes 97 65 52 44 44
----- ---- --- --- ---
Net Income $ 173 $ 137 $ 126 $115 $112
Earnings Per Share
of Common Stock(2): $ .79 $ .74 $ .69 $.64 $.63
Weighted Average Common
Shares Outstanding 220 185 183 181 178
===== ==== === === ===
At September 30, 1994
Pro Forma (3) Actual
--------- ------
CAPITALIZATION DATA
- -------------------
Long-Term Debt $1,082 41% $ 795 42%
Shareholders' Equity 1,562 59% 1,113 58%
------ --- ------ ---
Total Capitalization $2,644 100% $1,908 100%
====== ==== ====== ====
_______________________
(1) The Pro Forma Statement of Income Data reflects the combined results of
operations of Citizens and the Telecommunications Properties
(see "RECENT DEVELOPMENTS") as if the Telecommunications Properties
had been acquired on October 1, 1993. These amounts should be read in
conjunction with the Pro Forma Condensed Statements of Income
beginning on page S-13 of this Prospectus Supplement. The Pro Forma
Statement of Income Data is not necessarily indicative of what the
actual financial results would have been for the period had the
transactions occurred on the date indicated and does not purport to
indicate the financial results of future periods.
(2) Common Stock Series A and Series B per share amounts have been adjusted
retroactively for intervening stock dividends and stock splits
through September 30, 1994. No adjustment has been made for the 1.4%
1994 fourth quarter stock dividend as this adjustment is immaterial.
(3) The Pro Forma Capitalization Data reflects the permanent financing of
the acquisitions of the Telecommunications Properties as if the
acquisitions and permanent financing were closed on September
30, 1994. These amounts should be read in conjunction with the Pro
Forma Condensed Balance Sheet beginning on page S-11 of this Prospectus
Supplement.
<PAGE>
THE COMPANY
Citizens Utilities Company (the "Company" or "Citizens"), incorporated
in Delaware in 1935, is a diversified operating public utility currently
providing telecommunications, natural gas, electric, water and wastewater
services to customers in eighteen states. Citizens also holds a significant
investment interest in Centennial Cellular Corp., a cellular telephone
company, and owns Electric Lightwave, Inc., an alternative telecommunications
service provider in Arizona, California, Oregon, Utah and Washington.
Beginning with 1945, the Company has increased its revenues, net income and
earnings per share (adjusted for intervening stock dividends and stock
splits) every year without interruption.
As a result of its diversification, the Company is not dependent upon
any single geographic area for its revenues, nor is the Company dependent
upon any one type of utility service for its revenues. Because of this
diversity, no single regulatory body regulated or will regulate a utility
service of the Company accounting for more than 16% of its twelve months
ended September 30, 1994 revenues, pro forma for the acquisitions of the
Telecommunications Properties (see "RECENT DEVELOPMENTS" and "PRO FORMA
FINANCIAL STATEMENTS"). The Company is not aware of any other utility
company as fully diversified in both geographic areas served and variety of
services provided. The Company's operations are conducted principally in
smaller communities and non-urban areas. No material part of the Company's
business is dependent upon a single customer or a small group of customers.
The loss of any single customer or a small group of customers would not have
a materially adverse effect upon the Company. The Company's consumer
connections have increased from 26,150 in 1945 to 225,389 in 1965, to 610,585
in 1985 and to approximately 1,400,000 as of November 30, 1994.
The Company continually considers and is carrying out expansion through
significant acquisitions and joint ventures in the rapidly evolving
telecommunications and cable television industries and in traditional public
utility and related businesses.
RECENT DEVELOPMENTS
On May 19, 1993, Citizens and GTE Corporation ("GTE") announced the
signing of ten definitive agreements pursuant to which Citizens agreed to
acquire from GTE, for $1.1 billion in cash, certain telephone properties
serving approximately 500,000 local telephone access lines in nine states:
Arizona, California, Idaho, Montana, New York, Oregon, Tennessee, Utah and
West Virginia ("GTE Telephone Properties"). On December 31, 1993, 189,000
local telephone access lines in Idaho, Tennessee, Utah and West Virginia were
transferred to the Company. On June 30, 1994, 270,000 local telephone access
lines in New York were transferred to the Company. On November 30, 1994,
37,700 local telephone access lines in Arizona and Montana were transferred
to the Company, and on January 1, 1995, 5,000 local telephone access lines
in California were transferred to the Company. The remaining GTE Telephone
Property located in Oregon is expected to be transferred to Citizens by
early 1995 upon approval of the state regulatory commission.
<PAGE>
On November 29, 1994, Citizens and Alltel Corporation ("Alltel")
announced the signing of eight definitive agreements pursuant to which
Citizens agreed to acquire from Alltel, for $292 million, certain
telephone properties servicing approximately 110,000 local telephone access
lines and certain cable television systems servicing approximately 7,000
subscribers. The properties are located in eight states: Arizona,
California, Nevada, Oregon, New Mexico, Tennessee, Utah and West Virginia
("Alltel Telephone Properties"). The purchase price for the Alltel Telephone
Properties is expected to be in the form of $32 million of assumed low cost
Rural Electrification Administration debt, the transfer to Alltel of 3,600
Citizens' telephone access lines valued at $10 million, and structured as a
tax free exchange, and cash. The closings will be staggered and are expected
to occur state by state throughout the second half of 1995 and the first half
of 1996 as regulatory approvals are secured from the regulatory commissions
of the states in which the properties are located, the Federal Communications
Commission and the Department of Justice.
The GTE Telephone Properties and Alltel Telephone Properties
collectively are referred to herein as the "Telecommunications Properties".
The Public Utility Commission of the State of California ("CPUC") has
issued an order, effective January 1, 1995, authorizing competition for
intrastate intraLATA switched toll services, rebalancing local
exchange and toll rates, establishing more specific procedures for local
exchange carriers to enter into incentive regulatory frameworks ("IRF") and
providing a timetable for the elimination of the intrastate toll settlement
pools for mid-sized local exchange carriers. In support of the CPUC's
efforts, the Company's California telephone subsidiary (the "Subsidiary")
exited the toll settlement pools in 1991 and entered into a transition
contract with Pacific Bell. Pursuant to this contract, Pacific Bell agreed
to pay the Subsidiary $38 million annually through the end of 1994 to
partially offset the decline in revenues which resulted from exiting the toll
settlement pools. The Subsidiary expected to conclude a general rate case
permitting the implementation of rebalanced, competitive rates effective
January 1, 1995 intended to protect the Subsidiary's overall revenues, other
than the $38 million Pacific Bell contract payment, by enabling it to
effectively compete in the intrastate intraLATA switched toll services
market. Although this general rate case has not been finalized, the CPUC
has issued an interim rate order which becomes effective January 1, 1995 and
authorizes rebalanced competitive rates for the Subsidiary. In its general
rate case, the Subsidiary requested approval of an IRF which would allow it
to earn up to 5% in excess of its authorized rate of return. It is expected
that the approved IRF will be effective when the final rate order is issued
later in 1995. The Company has taken measures to position itself for a more
competitive telecommunications market. In this regard, the CPUC has granted
authority to the Company to enter new markets including the intrastate
intraLATA and interLATA toll markets as a toll service provider and the
market for broadband telecommunications services.
APPLICATION OF PROCEEDS
The net proceeds from the sale of the Common Stock Series A will be used
to repay outstanding short-term debt, including short-term debt issued to
partially fund the acquisition of the GTE Telephone Properties described
herein and in the accompanying Prospectus, on such date or dates as the
Company may determine from time to time.
CAPITAL REQUIREMENTS AND FINANCING
The total purchase price for the Telecommunications Properties, net of
the property to be transferred to Alltel, valued at $10 million, is $1.382
billion. The Company intends to permanently finance the acquisition of the
Telecommunications Properties, approximately one-third from the issuance of
equity securities, one-third from the issuance or assumption of debt
securities, and one-third from Company investments. In addition, the Company
is engaged in a continuous acquisition program and expects, from time to
time, to acquire properties in the rapidly evolving telecommunications and
cable television industries and traditional public utility and related
businesses.
The Company carries out a continuous construction program to maintain
reliable and safe service and to meet future customer service requirements.
The Company estimates that expenditures for construction, extension and
improvement of service relating to existing properties, including the
acquired GTE Telephone Properties, required approximately $250 million in
1994. The Company's construction program is under continuous review and may
be revised depending on business and economic conditions, regulatory action,
governmental mandates, customer demand and other factors. Capital
requirements are being financed from internally generated funds, and the
issuance of taxable and tax-exempt long-term debt, equity and short-term
debt.
The Company maintains $1.2 billion of committed bank lines of credit for
general corporate purposes. As of January 23, 1995, no amounts were
outstanding under the existing bank lines of credit.
DESCRIPTION OF COMMON STOCK SERIES A AND SERIES B
Citizens' common stock consists of two series: Common Stock Series A
and Common Stock Series B (collectively referred to as the "Common Stock").
The Company has authorized 200,000,000 shares of Common Stock Series A and
300,000,000 shares of Common Stock Series B. The Company, as of December 15,
1994, had outstanding 132,716,059 shares of Common Stock Series A and
57,966,408 shares of Common Stock Series B. As of December 15, 1994, there
were 23,956 and 18,634 record holders of the Company's Common Stock Series
A and Series B shares, respectively. The holders of Common Stock Series A
and Common Stock Series B are entitled to one vote for each share on all
matters voted on by stockholders. Pursuant to Citizens' Restated Certificate
of Incorporation, the holders of Common Stock Series A and the holders of
Common Stock Series B vote together as a single class on all matters to be
voted on by stockholders, unless otherwise expressly required by applicable
law. Common Stock Series A is convertible, on a share-for-share and tax-free
basis, into Common Stock Series B at all times. Common Stock Series B is not
convertible into Common Stock Series A. The Board of Directors of Citizens
may, in its sole discretion and at any time, require all of the holders of
Common Stock Series A to exchange all of their shares of Common Stock Series
A for shares of Common Stock Series B on a share-for-share basis. The
holders of Common Stock Series A and Series B participate ratably in
liquidation.
The transfer agent for the Company's Common Stock is the Illinois Stock
Transfer Company (the "Transfer Agent").
COMMON STOCK DIVIDENDS
Dividends have been paid to holders of Common Stock every year without
interruption beginning in 1939 and, although there can be no assurances as
to the amount of any future dividends, the Company has increased cash
dividends and/or cash value equivalents every year without interruption
beginning in 1946. Beginning in 1956, when the two-series common stock
capitalization of Citizens was initiated, and through 1989, only stock
dividends were paid on Common Stock Series A and only cash dividends were
paid on Common Stock Series B. Commencing in 1990, Citizens has declared and
paid quarterly stock dividends at the same rate on shares of both Common
Stock Series A and Common Stock Series B. The stock dividend rate is based
on an underlying cash equivalent. As described under "CERTAIN U.S. TAX
CONSIDERATIONS" the Company expects that under present federal tax law, stock
dividends on Common Stock Series A and Common Stock Series B, if paid and
received pro-rata and otherwise in the same manner as they have been since
1990, will be free of current federal income taxation on receipt. Such
stock dividends are treated as capital transactions when and if sold. Gain
or loss is based on the difference between sales price and adjusted basis per
share. For a more detailed description of U.S. tax considerations
see "CERTAIN U.S. TAX CONSIDERATIONS."
Fractional shares for shareholders whose accounts are registered with
Citizens' Transfer Agent ("Registered Shareholders") are aggregated until
they equal a full share, and the resulting share is credited to the
shareholder's account. Fractional share interests of Registered Shareholders
are sold only for shareholder accounts closed during the year. Street name
shareholders should consult their broker or custodial institution for
information about the treatment of fractional shares. Any fractional share
sold is treated for federal income tax purposes as proceeds from the sale of
stock.
The table below indicates the annualized stock dividend cash equivalent
per share (adjusted for subsequent stock dividends and stock splits) declared
by the Company's Board of Directors in determining the stock dividend rates
and stock dividends declared on Series A and Series B Common Stock. The
stock dividend cash equivalent reflects the total value, determined by the
Company's Board of Directors, of the stock dividends paid on a share of
Common Stock during the year in question.
Stock Dividend Cash Stock
Year Equivalent Per Share Dividend Rate
---------- --------------------- ----------------
1994 $.74 1/4 4.95%
1993 $.69 4.30%
1992 $.62 5.50%
1991 $.53 7.70%
STOCK DIVIDEND SALE PLAN AND CONVERSION OF
COMMON STOCK SERIES A INTO COMMON STOCK SERIES B
The Company has a Stock Dividend Sale Plan (the "Plan") which enables
Common Stock Series B shareholders to elect to have their future stock
dividends sold and the cash proceeds of the sale (minus a 5 cents per share
commission) distributed to them quarterly. If a Common Stock Series B
shareholder's account is held by a broker or custodial institution
participating in the Plan, the cash proceeds are sent to the broker or
custodial institution. Generally, for federal income tax purposes, the
differences between the proceeds from the sale of the stock dividends (the
net cash received) and the adjusted basis of the shares sold are treated as
a capital transaction. For a more detailed description of U.S. tax
considerations see "CERTAIN U.S. TAX CONSIDERATIONS."
Holders of Common Stock Series A may at any time convert, on a
share-for-share and tax-free basis, their Common Stock Series A shares into
Common Stock Series B shares. Conversion and enrollment in the Plan may be
accomplished by instruction to an Underwriter or broker in conjunction with
the Offerings. Subsequent to the Offerings, a Registered Shareholder may
give instructions to the Company's Transfer Agent and street name holders may
give instructions to their brokers to accomplish a conversion from Common
Stock Series A into Common Stock Series B, and in conjunction with said
conversion, or after such conversion, may enroll in the Plan.
Common Stock Series B shareholders may enroll throughout the year in the
Plan, except during the following periods between the quarterly dividend
declaration and dividend payment dates: February 15-March 31; May 16-June
30; August 16-September 30; and November 16-December 31, during which the
effectiveness of enrollment will be delayed until the end of each period.
After a Common Stock Series B shareholder account has been enrolled in
the Plan, future stock dividends in that account will be sold quarterly,
unless the Company's Transfer Agent receives written notification from a
Series B shareholder to withdraw that account from the Plan. Shareholders
who withdraw an account from the Plan will then receive quarterly stock
dividends and are not eligible to re-enroll that account in the Plan for 12
months.
COMMON STOCK PRICE RANGE
Prior to February 24, 1992, the Company's Common Stock was traded on the
over-the-counter market as a National Market Issue under NASDAQ symbols CITUA
for Series A and CITUB for Series B shares. On February 24, 1992, Citizens
commenced trading on the New York Stock Exchange under the symbols
CZNA and CZNB for Common Stock Series A and Common Stock Series B shares,
respectively.
<PAGE>
The table below indicates the high and low prices per share for the
periods shown. From January 2, 1991, through February 21, 1992, the last day
the stock was traded on the over-the-counter market, the prices were taken
from the NASDAQ/NMS Monthly Statistical Report. The high and low prices per
share from February 24, 1992, through January 20, 1995 were taken from the
daily quotations published in The Wall Street Journal during the periods
indicated and for January 23, 1995 from wire services. Prices have been
adjusted retroactively for intervening stock dividends, the July 24, 1992
3-for-2 stock split and the August 31, 1993 2-for-1 stock split, rounded to
the nearest 1/8th.
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
High Low High Low High Low High Low
1994:
Series A $17 1/8 14 15 7/8 13 1/4 14 1/2 13 1/4 14 12 1/2
Series B $17 1/4 13 7/8 15 7/8 13 1/4 14 1/2 13 1/4 14 12 5/8
1993:
Series A $16 3/4 12 3/4 17 1/2 15 1/8 17 1/4 12 5/8 18 7/8 15 3/8
Series B $16 3/4 12 7/8 17 1/2 15 17 1/4 12 5/8 18 3/4 15 3/8
1992:
Series A $11 3/4 10 11 1/2 10 1/2 13 10 1/4 13 3/4 11 3/8
Series B $11 1/2 9 7/8 11 1/2 10 1/2 13 10 1/8 13 3/4 11 3/8
1991:
Series A $8 1/8 6 1/4 7 7/8 7 9 1/8 7 10 3/4 8 5/8
Series B $8 1/8 6 1/4 7 3/4 7 9 1/8 6 3/4 10 3/4 8 3/8
The reported high and low prices from January 1 through January 23,
1995 were $14 1/2 and $12 3/8 per share of Common Stock Series A and $14 1/2
and $12 3/8 per share of Common Stock Series B, respectively. The reported last
sale prices on the New York Stock Exchange on January 23, 1995 were $13 3/8
per share of Common Stock Series A and $13 1/2 per share of Common Stock
Series B.
<PAGE>
PRO FORMA FINANCIAL STATEMENTS
(These Pro Forma Financial Statements update and supersede the Pro Forma
Financial Statements in the Prospectus.)
Citizens Utilities Company and Telecommunications Properties
Pro Forma Condensed Balance Sheet
(In thousands)
The following Pro Forma Condensed Balance Sheet represents the historical
condensed balance sheet of Citizens at September 30, 1994, giving effect to
the acquisitions of the yet to be acquired Telecommunications Properties
following the purchase method of accounting, as well as the permanent
financing for the acquisitions of the Telecommunications Properties, as if
such acquisitions and financings were closed on September 30, 1994. The Pro
Forma Condensed Balance Sheet should be read in conjunction with the
historical financial statements and related notes thereto of Citizens which
are incorporated by reference herein. The Pro Forma Condensed Balance Sheet
is not necessarily indicative of what the actual financial position would
have been had the transactions occurred at the date indicated and does not
purport to indicate future financial position.
At September 30, 1994
---------------------
Pro Forma
---------------------
Citizens Adjustments (1) Adjusted
-------- ----------- --------
Assets
Current Assets:
Cash $18,139 $414,000 (2) $ 18,139
(414,000) (3)
Temporary Investments 77,449 (77,449) (2) 0
Accounts Receivable 149,015 149,015
Other 31,897 31,897
--------- ----------
Total Current Assets 276,500 199,051
--------- ----------
Net Property, Plant
and Equipment 2,317,477 414,000 (3) 2,731,477
--------- ---------
Investments 382,766 (198,551) (2) 184,215
Regulatory Assets 149,559 149,559
Deferred Debits and
Other Assets 227,066 227,066
---------- ----------
$3,353,368 $ 138,000 $3,491,368
========== =========== ==========
Liabilities and Shareholders' Equity
Current Liabilities:
Long-Term Debt Due Within
One Year $ 10,728 $ 10,728
Other 261,948 261,948
Short-Term Debt 598,000 $ (598,000) (2) 0
---------- ----------
Total Current
Liabilities 870,676 272,676
Customer Advances for Construction and
Contributions in Aid
of Construction 206,863 206,863
Deferred Income Taxes 247,294 247,294
Regulatory Liabilities 26,931 26,931
Deferred Credits and
Other Liabilities 92,911 92,911
Long-Term Debt 795,250 287,000 (2) 1,082,250
--------- ---------
2,239,925 1,928,925
--------- ---------
Shareholders' Equity
Common Stock Issued, $.25 Par Value
Series A 33,220 33,220
Series B 14,309 14,309
Additional Paid-In Capital 818,758 449,000 (2) 1,267,758
Retained Earnings 234,704 234,704
Unrealized gain on
securities classified
as available for sale 12,452 12,452
--------- ---------
1,113,443 1,562,443
--------- ---------
$3,353,368 $ 138,000 $3,491,368
========== ========== ==========
See Notes to Pro Forma Condensed Balance Sheet on page S-12.
<PAGE>
PRO FORMA FINANCIAL STATEMENTS (continued)
Citizens Utilities Company and Telecommunications Properties
Notes to Pro Forma Condensed Balance Sheet
(1) In May 1993, Citizens and GTE signed ten definitive agreements pursuant
to which Citizens agreed to acquire from GTE, for $1.1 billion in cash,
certain GTE Telephone Properties serving approximately 500,000 local
telephone access lines in nine states. On December 31, 1993, 189,000
local telephone access lines in Idaho, Tennessee, Utah and West Virginia
were transferred to the Company. On June 30, 1994, 270,000 access lines
in New York were transferred to the Company. On November 30, 1994,
37,700 access lines in Arizona and Montana were transferred to the
Company, and on January 1, 1995, 5,000 local telephone access lines
in California were transferred to the Company. The remaining GTE
Telephone Property located in Oregon is expected to be transferred to
Citizens by early 1995 upon approval of the state regulatory commission.
In November 1994, Citizens and Alltel signed eight definitive agreements
pursuant to which Citizens agreed to acquire from Alltel, for $292
million, certain Alltel Telephone Properties servicing approximately
110,000 local telephone access lines and certain cable television systems
servicing approximately 7,000 subscribers. The properties are located in
eight states: Arizona, California, Nevada, Oregon, New Mexico,
Tennessee, Utah and West Virginia. The purchase price for the Alltel
Telephone Properties is expected to be in the form of $32 million of
assumed low cost Rural Electrification Administration debt, the transfer
to Alltel of 3,600 Citizens' telephone access lines which have been valued
at $10 million, and structured as a tax free exchange, and cash.
Through September 30, 1994, the purchase price for the Telecommunications
Properties had been permanently financed with approximately $182 million
of Investments, $13 million of Equity issued pursuant to the Company's
Direct Stock Purchase Plan and employee benefit plans, and $175 million
of Long-Term Debt issued on April 26, 1994 with an interest rate of 7.6%
and a maturity date of June 1, 2006. On October 6, 1994, an additional
$100 million of Long-Term Debt was issued with an interest rate of 7.68%
and a maturity date of October 1, 2034. The remainder of the purchase
price of the acquired Telecommunications Properties has been temporarily
financed with Short-Term Debt.
(2) When added to the $182 million of Investments used, and the $175 million
of Long-Term Debt and the $13 million of Equity issued through September
30, 1994 to permanently finance the acquisitions of the
Telecommunications Properties as described in Note (1) above, these
adjustments reflect the permanent financing of the $1.382 billion
purchase price (net of the property valued at $10 million to be
transferred to Alltel) for the Telecommunications Properties with
approximately equal components of Investments (including Temporary
Investments), Long-Term Debt and Equity.
(3) Reflects the purchase price of the Telecommunications Properties to be
transferred to Citizens after September 30, 1994, net of the property
valued at $10 million to be transferred to Alltel.
<PAGE>
PRO FORMA FINANCIAL STATEMENTS (continued)
(These Pro Forma Financial Statements update and supersede the Pro Forma
Financial Statements in the Prospectus.)
Citizens Utilities Company and Telecommunications Properties
Pro Forma Condensed Statement of Income
(In thousands, except per share amounts)
The following Pro Forma Condensed Statement of Income for the twelve
months ended September 30, 1994 combines the historical statements of income
of Citizens and the Telecommunications Properties as if the acquisitions and
the permanent financings had been closed October 1, 1993. The Pro Forma
Condensed Statement of Income should be read in conjunction with the
historical financial statements and related notes thereto of Citizens and
those of the Telecommunications Properties that have been audited and which
are incorporated by reference herein. The Pro Forma Condensed Statement of
Income is not necessarily indicative of what the actual financial results
would have been for the period had the transactions occurred at the date
indicated and does not purport to indicate the financial results of future
periods.
Twelve Months Ended September 30, 1994
--------------------------------------------------
Pro Forma
---------------------
Citizens Acquisitions*(1) Adjustments Combined
-------- ------------ ----------- --------
Operating Revenues $816,870 $ 342,466 $1,159,336
Operating Expenses:
Operating Expenses 516,709 181,315 $ (16,700)(2) 681,324
Depreciation and
Amortization 96,970 65,814 6,100 (3) 168,884
-------- --------- --------- ---------
Total Operating
Expenses 613,679 247,129 (10,600) 850,208
Net Operating Income 203,191 95,337 10,600 309,128
Other Income (Deductions) 55,744 (2,996) (18,000) (4) 34,748
Interest Expense 57,305 20,348 (3,300) (5) 74,353
-------- --------- --------- ---------
Income Before
Income Taxes 201,630 71,993 (4,100) 269,523
Income Taxes 64,833 24,183 7,600 (6) 96,616
-------- --------- --------- ---------
Net Income $ 136,797 $ 47,810 $ (11,700) $ 172,907
========== ========== ========== =========
Earnings Per Share of
Common Stock:
Series A and Series B** $.74 $ .79 (7)
Weighted Average
Common Shares** 185,109 219,675 (7)
* Represents the financial results from October 1, 1993 to the dates of
acquisition for all the GTE Telephone Properties acquired through
September 30, 1994, and for the yet to be acquired GTE Telephone
Properties (as of September 30, 199) and for the Alltel Telephone
Properties, net of the financial results for the property to be transferred
to Alltel, for the entire twelve month period. Financial results for the
GTE Telephone Properties acquired from their dates of acquisition through
September 30, 1994 are included in Citizens' twelve months ended
September 30, 1994 financial results.
** Adjusted for Citizens' stock dividends paid through September 30, 1994.
No adjustment has been made for the 1.4% 1994 fourth quarter stock
dividend as this adjustment is immaterial.
See Notes to Pro Forma Condensed Statements of Income on page S-15.
<PAGE>
PRO FORMA FINANCIAL STATEMENTS (continued)
(These Pro Forma Financial Statements update and supersede the Pro Forma
Financial Statements in the Prospectus.)
Citizens Utilities Company and Telecommunications Properties
Pro Forma Condensed Statement of Income
(In thousands, except per share amounts)
The following Pro Forma Condensed Statement of Income for the year
ended December 31, 1993 combines the historical statements of income of
Citizens and the Telecommunications Properties as if the acquisitions and the
required financings had been closed January 1, 1993. The Pro Forma Condensed
Statement of Income should be read in conjunction with historical financial
statements and related notes thereto of Citizens and those of the
Telecommunications Properties that have been audited and which are
incorporated by reference herein. The Pro Forma Condensed Statement of
Income is not necessarily indicative of what the actual financial results
would have been for the period had the transactions occurred at the date
indicated and does not purport to indicate the financial results of future
periods.
Year Ended December 31, 1993
--------------------------------------------------
Pro Forma
--------------------
Citizens Acquisitions*(1) Adjustments Combined
-------- ---------------- ----------- --------
Operating Revenues $619,392 $513,636 $1,133,028
Operating Expenses:
Operating Expenses 403,534 278,978 $ (16,700)(2) 665,812
Depreciation and
Amortization 54,698 100,528 10,700 (3) 165,926
-------- --------- --------- ---------
Total Operating
Expenses 458,232 379,506 (6,000) 831,738
Net Operating Income 161,160 134,130 6,000 301,290
Other Income
(Deductions) 54,199 (2,072) (23,000) (4) 29,127
Interest Expense 37,431 33,215 3,300 (5) 73,946
-------- --------- --------- ---------
Income Before Income
Taxes 177,928 98,843 (20,300) 256,471
Income Taxes 52,298 33,811 3,600 (6) 89,709
-------- --------- ---------- ---------
Net Income $125,630 $ 65,032 $ (23,900) $ 166,762
Earnings Per Share
of Common Stock:
Series A and
Series B** $ .69 $ .76 (7)
Weighted Average
Common Shares** 182,906 218,399 (7)
* Represents the financial results for the year ended December 31, 1993 for
all Telecommunications Properties acquired or to be acquired net of the
financial results for the property to be transferred to Alltel.
** Restated through the third quarter 1994 stock dividend. No adjustment has
been made for the 1.4% 1994 fourth quarter stock dividend as this
adjustment is immaterial.
See Notes to Pro Forma Condensed Statements of Income on page S-15.<PAGE>
PRO FORMA FINANCIAL STATEMENTS (continued)
Citizens Utilities Company and Telecommunication Properties
Notes to Pro Forma Condensed Statements of Income
(1) In May 1993, Citizens and GTE signed ten definitive agreements
pursuant to which Citizens agreed to acquire from GTE, for $1.1
billion in cash, certain GTE Telephone Properties serving approximately
500,000 local telephone access lines in nine states. On December 31,
1993, 189,000 local telephone access lines in Idaho, Tennessee, Utah and
West Virginia were transferred to the Company. On June 30, 1994,
270,000 access lines in New York were transferred to the Company.
On November 30, 1994, 37,700 access lines in Arizona and Montana were
transferred to the Company, and on January 1, 1995, 5,000 local telephone
access lines in California were transferred to the Company. The
remaining GTE Telephone Property located in Oregon is expected to be
transferred to Citizens by early 1995 upon approval of the state
regulatory commission.
In November 1994, Citizens and Alltel signed eight definitive agreements
pursuant to which Citizens agreed to acquire from Alltel, for $292
million, certain Alltel Telephone Properties servicing approximately
110,000 local telephone access lines and certain cable television
systems servicing approximately 7,000 subscribers. The properties are
located in eight states: Arizona, California, Nevada, Oregon, New
Mexico, Tennessee, Utah and West Virginia. The purchase price for the
Alltel Telephone Properties is expected to be in the form of $32 million
of assumed low cost Rural Electrification Administration debt, the
transfer to Alltel of 3,600 Citizens' telephone access lines, which have
been valued at $10 million, and structured as a tax free exchange, and
cash.
(2) Elimination of certain corporate overhead expenses allocated by GTE to
certain of the GTE Telephone Properties which will not have a continuing
impact on the combined entity.
(3) Represents amortization of $253 million of excess purchase price over
net book value of assets acquired. Pursuant to Statement of Financial
Accounting Standards No. 71, "Accounting for the Effects of Certain
Types of Regulation," the remaining $138 million of excess of purchase
price over net book value of assets acquired will be deferred. The
Company intends to seek from the public utilities commissions maximum
recovery of the excess of purchase price over net book value in future
rate proceedings.
(4) Represents an adjustment to reflect the elimination from Other Income
of all tax-exempt investment income associated with the $458 million of
Company Investments which have been or are expected to be used to
partially finance the acquisition of the Telecommunications Properties.
Approximately $88 million of Investments were used on December 31, 1993
and approximately $94 million of additional Investments were used from
January 1, 1994 through September 30, 1994 to permanently finance the
GTE Telephone Properties acquisitions.)
(5) Represents an adjustment to reflect the inclusion in Interest Expense
of all the interest expense on $462 million of Long-Term Debt which has
been or is expected to be issued or assumed to partially finance the
acquisition of the Telecommunications Properties, net of the elimination
of interest expense on Long-Term Debt which is associated with the
Telecommunications Properties and which was not or will not be assumed
by the Company. On April 26, 1994, the Company issued $175 million
of Long-Term Debt at par with an interest rate of 7.6% and a maturity
date of June 1, 2006. On October 6, 1994, the Company issued $100
million of Long-Term Debt at par with an interest rate of 7.68% and a
maturity date of October 1, 2034.
(6) Adjustment to income tax expense based on Income Before Income Taxes and
the applicable statutory tax rate.
(7) The Pro Forma earnings per share is based on the average number of
common shares outstanding plus the number of additional shares assumed
to have been issued to finance $462 million of the Telecommunications
Properties purchase price assuming such shares were outstanding for the
entire twelve month periods. Through September 30, 1994 the Company
received $13 million from the issuance of Equity pursuant to the
Company's Direct Stock Purchase Plan and employee benefit plans.
<PAGE>
CERTAIN U.S. TAX CONSIDERATIONS
The following is a general discussion of certain U.S. federal income and
estate tax consequences of the ownership and disposition of Common Stock.
This discussion is intended only as a descriptive summary and does not
purport to be a complete analysis or listing of all possible tax
considerations. The discussion deals only with Common Stock held as capital
assets and does not address any special United States tax consequences that
may be applicable to holders that are subject to special treatment under the
United States Internal Revenue Code of 1986, as amended (the "Code").
Furthermore, the following discussion is based on provisions of the Code and
administrative and judicial interpretations as of the date hereof, all of
which are subject to change. Each prospective holder is urged to consult a
tax advisor with respect to the federal tax consequences of holding and
disposing of Common Stock in light of their particular situation, as well
as any tax consequences that may arise under the laws of any U.S. state,
municipality or other taxing jurisdiction.
CERTAIN TAX CONSIDERATIONS APPLICABLE TO A U.S. HOLDER
As used herein, a "U.S. holder" of Common Stock means a holder that is a
citizen or resident of the United States, a corporation, partnership or other
entity created or organized in or under the laws of the United States or any
political subdivision thereof, or an estate or trust the income of which is
subject to United Sates federal income taxation regardless of its source.
Stock Dividends
The Company currently pays stock dividends on its Common Stock.
Distributions of stock that are received as part of a pro rata distribution
of stock to all stockholders generally should not be subject to United States
federal income tax when received. The basis of the shares received in a
distribution will be determined by allocating, proportionately, based on fair
market value, a holder's basis in its Common Stock prior to the stock
dividend between the shares held before the dividend and the shares received
as a stock dividend. The Company anticipates that all of its stock dividends
will be tax free to both U.S. holders and non-U.S. holders.
Conversion of Common Stock Series A into Common Stock Series B
A U.S. holder will not recognize gain or loss on the conversion of Common
Stock Series A into Common Stock Series B.
Disposition of Common Stock
For United States federal income tax purposes, a U.S. holder will
recognize taxable gain or loss on any sale or exchange of Common Stock
(including sales of fractional shares and sales under the Company's
Stock Dividend Sale Plan of Common Stock which is treated as distributed to
a holder) in an amount equal to the difference between the amount realized
for the Common Stock and the U.S. holder's basis in the Common Stock. Such
gain or loss will be a capital gain or loss and will be a long-term capital
gain or loss if the Common Stock has been held for more than one year on the
date of the sale or exchange.
A U.S. holder should consult their own tax advisor regarding the federal
income tax consequences of the disposition of Common Stock in light of their
particular situations.
Certain Tax Considerations Applicable to A Non-U.S. Holder
As used herein, a "non-U.S. holder" is a holder that is not a U.S. holder.
An individual may, among other ways, be deemed to be a resident alien (as
opposed to a non-resident alien) by virtue of being present in the United
States on at least 31 days in the calendar year and for an aggregate of 183
days during a three-year period ending in the current calendar year (counting
for such purposes all of the days present in the current year, one-third of
the days present in the immediately preceding year, and one-sixth of the days
present in the second preceding year). Resident aliens are subject to U.S.
federal tax as if they were U.S. citizens.
Dividends
As indicated above, the Company currently pays stock dividends on its
Common Stock. The Company anticipates that all of its stock dividends will
be tax free to a non-U.S. holder. The following discussion of U.S. federal
income taxes would apply in the event taxable dividends are
declared in the future and are paid to non-U.S. holders. In general,
dividends payable in cash or property (or which are otherwise taxable)
received by a non-U.S. holder of Common Stock will be subject to withholding
of U.S. federal income tax at a 30% rate or such rate as may be specified by
an applicable income tax treaty, unless the dividends are effectively
connected with the conduct of a trade or business by the non-U.S. holder
within the United States. Dividends that are effectively connected with such
holder's conduct of a trade or business in the United States are subject to
tax on a net income basis at rates applicable to U.S. holders and are not
generally subject to withholding. Any such effectively connected dividends
received by a non-U.S. corporation may also, under certain circumstances, be
subject to an additional "branch profits tax" at a 30% rate or such rate as
may be specified by an applicable income tax treaty.
Under current U.S. Treasury regulations, dividends paid to an address
outside the United States are presumed to be paid to a resident of such
country for purposes of the withholding rules discussed above,
and, under the current interpretation of U.S. Treasury regulations, for
purposes of determining the applicability of a tax treaty rate. Under
proposed U.S. Treasury regulations, not currently in effect, however,
a non-U.S. holder of Common Stock who wishes to claim the benefit of an
applicable treaty rate would be required to satisfy applicable certification
and other requirements.Currently certain certification and disclosure
requirements must be complied with in order to claim a reduction or an
exemption from withholding under the effectively connected income exemption.
A non-U.S. holder of Common Stock that is eligible for a reduced rate or
an exemption of U.S. withholding tax pursuant to an income tax treaty may
obtain a refund of any excess amounts currently withheld by filing an
appropriate claim for refund with the U.S. Internal Revenue Service.
Conversion of Common Stock Series A inot Common Stock Series B
A non-U.S. holder will not recognize gain or loss on the conversion of
common Stock Series A into Common Stock Series B.
<PAGE>
Gain on Disposition of Common Stock
A non-U.S. holder generally will not be subject to U.S. federal income tax
in respect of gain recognized on a disposition of Common Stock including
stock dividend shares unless (i) the gain is effectively connected with a
trade or business of the non-U.S. holder in the United States, (ii) in the
case of a non-U.S. holder who is an individual and holds the Common Stock as
a capital asset, such holder is present in the United States for 183 or more
days in the taxable year of the sale and certain other conditions are met,
or (iii) the Company is or has been a "U.S. real property holding
corporation" for federal income tax purposes. The Company has not been, is
not and does not anticipate becoming, a "U.S. real property holding
corporation" for U.S. federal income tax purposes.
Federal Estate Taxes
Common Stock owned or treated as owned by a non-U.S. holder at the time
of death will be included in such holder's gross estate for U.S. federal
estate tax purposes, unless an applicable estate tax treaty provides
otherwise.
U.S. Reporting Requirements and Backup Withholding Tax
Under U.S. Treasury regulations, the Company must report annually to the
Internal Revenue Service and to each non-U.S. holder the amount of dividends
payable in cash or property (or which are otherwise taxable) received by such
holder and the tax withheld with respect to such dividends, regardless of
whether withholding was required. Copies of the returns reporting such
dividends and withholding may also be made available to the tax authorities
in the country in which the non-U.S. holder resides under the provisions of
an applicable income tax treaty.
Backup withholding (which generally is a withholding tax imposed at the
rate of 31% on certain payments to persons that fail to furnish certain
information under the U.S. information reporting requirements) will generally
not apply to dividends paid to a non-U.S. holder at an address outside the
United States (unless the payer has knowledge that the payee is a U.S.
person). Backup withholding and information reporting generally will apply
to dividends paid to addresses inside the United States on shares of Common
Stock to beneficial owners that are not "exempt recipients" and that fail to
provide in the manner required by regulation certain identifying information.
In general, backup withholding and information reporting will not apply
to a payment of the proceeds of a sale of Common Stock to or through a
foreign office of a broker. If, however, such broker is, for U.S. federal
income tax purposes, a U.S. person, a controlled foreign corporation, or a
foreign person that derives 50% or more of its gross income for certain
periods from the conduct of a trade or business in the United States, such
payments will not be subject to backup withholding but will be subject to
information reporting, unless (i) such broker has documentary evidence in its
records that the beneficial owner is a non-U.S. holder and certain other
conditions are met, or (ii) the beneficial owner otherwise establishes an
exemption.
Payment to or through a U.S. office of a broker of the proceeds of a sale
of Common Stock is subject to both backup withholding and information
reporting unless the beneficial owner certifies under penalties
of perjury that it is a non-U.S. holder, or otherwise establishes an
exemption.
Any amounts withheld under the backup withholding rules will be allowed
as a refund or a credit against such holder's U.S. federal income tax
liability provided the required information is furnished to the
Internal Revenue Service.
The backup withholding and information reporting rules are currently under
review by the U.S. Treasury Department and their application to the Common
Stock could be changed by future regulations.
A Non-U.S. holder should consult their own tax advisor regarding the
federal income tax consequences of the disposition of Common Stock in light
of their particular situations.
UNDERWRITING
The underwriters of the offering of the Common Stock Series A in the
United States named below (the "U.S. Underwriters"), for whom Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Lehman Brothers Inc., Morgan Stanley &
Co. Incorporated, Smith Barney Inc. and Robert W. Baird & Co. Incorporated
are acting as representatives (the "Representatives"), have severally agreed,
subject to the terms and conditions of a U.S. Underwriting Agreement with the
Company (the "U.S. Underwriting Agreement"), to purchase from the Company the
aggregate number of shares of Common Stock Series A set forth opposite their
respective names below.
Number of
U.S. Underwriters shares
---------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated 2,182,500
Lehman Brothers Inc. 2,182,500
Morgan Stanley & Co. Incorporated 2,182,500
Smith Barney Inc. 2,182,500
Robert W. Baird & Co. Incorporated 450,000
Bear, Stearns & Co. Inc. 170,000
CS First Boston Corporation 170,000
Alex, Brown & Sons Incorporated 170,000
Dean Witter Reynolds Inc. 170,000
Dillon, Read & Co. Inc. 170,000
Donaldson, Lufkin & Jenrette Securities
Corporation 170,000
A.G. Edwards & Sons, Inc. 170,000
Goldman, Sachs & Co. 170,000
Janney Montgomery Scott Inc. 170,000
Edward D. Jones & Co. 170,000
Lazard Freres & Co. 170,000
NatWest Securities Limited 170,000
Oppenheimer & Co., Inc. 170,000
PaineWebber Incorporated 170,000
Prudential Securities Incorporated 170,000
Salomon Brothers Inc 170,000
Wertheim Schroder & Co. Incorporated 170,000
Advest, Inc. 85,000
William Blair & Company 85,000
J.C. Bradford & Co. 85,000
Cowen & Company 85,000
Dain Bosworth Incorporated 85,000
Doft & Co., Inc. 85,000
First Albany Corporation 85,000
First of Michigan Corporation 85,000
Furman Selz Incorporated 85,000
Gabelli & Company, Inc. 85,000
Gruntal & Co., Incorporated 85,000
Interstate/Johnson Lane Corporation 85,000
Kemper Securities, Inc. 85,000
C.J. Lawrence/Deutsche Bank Securities Corporation 85,000
Legg Mason Wood Walker, Incorporated 85,000
McDonald & Company Securities, Inc. 85,000
Moran & Associates, Inc. Securities Brokerage 85,000
Morgan Keegan & Company, Inc. 85,000
Piper Jaffray Inc. 85,000
Principal Financial Securities, Inc. 85,000
Ragen MacKenzie Incorporated 85,000
Rauscher Pierce Refsnes, Inc. 85,000
Raymond James & Associates, Inc. 85,000
The Robinson-Humphrey Company, Inc. 85,000
Roney & Co. 85,000
Stephens Inc. 85,000
Stifel, Nicolaus & Company, Incorporated 85,000
Sutro & Co. Incorporated 85,000
Tucker Anthony Incorporated 85,000
Wheat, First Securities, Inc. 85,000
M.R. Beal & Company 34,000
The Chapman Company 34,000
The Chicago Corporation 34,000
Crowell, Weedon & Co. 34,000
D.A. Davidson & Co. Incorporated 34,000
Dickinson & Co. 34,000
Hanifen, Imhoff Inc. 34,000
J.J. B. Hilliard, W.L. Lyons, Inc. 34,000
Johnston, Lemon & Co. Incorporated 34,000
Mesirow Financial, Inc. 34,000
The Ohio Company 34,000
Parker/Hunter Incorporated 34,000
Pryor, McClendon, Counts & Co., Inc. 34,000
Raffensperger, Hughes & Co., Inc. 34,000
Scott & Stringfellow, Inc. 34,000
The Seidler Companies Incorporated 34,000
Muriel Siebert & Co., Inc. 34,000
Smith, Moore & Co. 34,000
Utendahl Capital Partners, L.P. 34,000
Wedbush Morgan Securities 34,000
----------
Total 15,300,000
==========
The managers of the offering of the Common Stock Series A outside of the
United States (the "International Managers"), for whom Merrill Lynch
International Limited, Lehman Brothers International (Europe), Morgan Stanley
& Co. International Limited, NatWest Securities Limited and Smith Barney Inc.
are acting as lead managers (the "Lead Managers"), have severally agreed,
subject to the terms and conditions of an International Underwriting
Agreement (the "International Underwriting Agreement"), to purchase from the
Company an aggregate number of shares of Common Stock Series A set forth
opposite their respective names below.
<PAGE>
Number of
International Managers shares
Merrill Lynch International Limited 340,000
Lehman Brothers International (Europe) 340,000
Morgan Stanley & Co. International Limited 340,000
NatWest Securities Limited 340,000
Smith Barney Inc. 340,000
---------
Total 1,500,000
=========
The U.S. Underwriting Agreement and the International Underwriting
Agreement (collectively, the "Underwriting Agreements") provide that the
obligations of the U.S. Underwriters and the International Managers to
purchase shares of the Common Stock are subject to certain conditions. Each
Underwriting Agreement provides that, if any shares are purchased pursuant
to such Underwriting Agreement, all the shares of the Common Stock agreed to
be purchased pursuant to such Underwriting Agreement must be so purchased.
The offering price and the underwriting discounts and commissions for the
offering in the United States and the offering outside the United States are
identical. The closing of the offering outside the United States is a
condition to the closing of the offering in the United States and the closing
of the offering in the United States is a condition to the closing of the
offering outside the United States.
The U.S. Underwriters and the International Managers have entered into an
Intersyndicate Agreement which provides for the coordination of their
activities. The U.S. Underwriters and the International Managers are
permitted to sell shares of Common Stock to each other for purposes of resale
at the initial public offering price, less an amount not greater than the
selling concession.
The Company has granted to the U.S. Underwriters and the International
Managers options to purchase up to an additional 2,295,000 and 255,000 shares
of the Common Stock, respectively, at the public offering price less the
aggregate underwriting discount, solely to cover over-allotments. Either or
both options may be exercised at any time up to 30 days after the date of
this Prospectus Supplement. To the extent that the U.S. Underwriters and
International Managers exercise such options, each of the U.S. Underwriters
or International Managers, as the case may be, will have a firm commitment,
subject to certain conditions, to purchase a number of option shares
proportionate to such U.S. Underwriter's or International Manager's initial
commitment.
The U.S. Underwriters and the International Managers propose initially to
offer the shares of the Common Stock directly to the public at the offering
price set forth on the cover page of this Prospectus Supplement, and to
certain dealers (who may include the U.S. Underwriters and International
Managers) at such public offering price less a selling concession not in
excess $.32 per share. The selected dealers may reallow a discount not in
excess $.10 per share on sales to certain other dealers. After the
offering of the Common Stock, the public offering price, concession and
discount may be changed.
The Company has agreed to indemnify the U.S. Underwriters and the
International Managers against certain liabilities which may be incurred in
connection with the offering of the Common Stock and the exercise of the
over-allotment options, including liabilities under the Securities Act of
1933, as amended.
The Company has agreed, with certain exceptions, that it will not sell or
otherwise dispose of any shares of Common Stock or any securities convertible
into or exchangeable or exercisable for any such shares for a period of 90
days from the date of this Prospectus Supplement without the written consent
of the Representatives.
Under the terms of the Intersyndicate Agreement, the U.S. Underwriters and
any dealer to whom they sell shares of Common Stock will not offer to sell
or sell shares of Common Stock to persons who are non-U.S. persons or to
persons they believe intend to resell to persons who are non-U.S. persons,
and the International Managers and any dealer to whom they sell shares of
Common Stock will not offer to sell or sell shares of Common Stock to U.S.
persons or to persons they believe intend to resell to U.S. persons,
except in each case for transactions pursuant to such agreement.
Each International Manager has agreed that (i) it has not offered or sold,
and it will not offer or sell, any shares of Common Stock in the United
Kingdom by means of any documents, other than to persons whose ordinary
business is to buy or sell shares or debetnures whether as principal
or agent (except in circumstances which do not constitute an offer to the public
within the meaning of the Companies Act of 1985), (ii) it has complied and
will comply with all applicable provisions of the Financial Services Act 1986
with respect to anything done by it in relation to the Common Stock in, from,
or otherwise involving the United Kingdom, and (iii) it has only issued or
passed on and will only issue or pass on to any person in the United Kingdom
any document received by it in connection with the issuance or sale of Common
Stock to a person who is of a kind described in Article 9(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1988
(as amended) or is a person to whom the document may otherwise be lawfully
issued or passed on.
Purchasers of the shares offered hereby may be required to pay stamp taxes
and other charges in accordance with the laws and practices of the country
of purchase in addition to the public offering price.
Certain of the U.S. Underwriters and the International Managers have
provided from time to time, and expect to provide in the future, investment
banking services to the Company and its affiliates for which such U.S.
Underwriters and the International Managers have received and will receive
customary fees and commissions.
EXPERTS
The financial statements of the Mountain State Telephone Company, Alltel
Nevada, Inc. and Navajo Communications Company, Inc. incorporated by
reference herein, have been examined by Arthur Andersen LLP to the extent and
for the periods indicated in their reports, and have been so incorporated by
reference in reliance upon the reports of Arthur Andersen LLP also
incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing.
<PAGE>
No person has been authorized to give any information or to make any
representations not contained or incorporated by reference in this Prospectus
Supplement or the accompanying Prospectus and, if given or made, such
information or representations must not be relied upon as having been
authorized by the Company or by any other person, underwriter, dealer or
agent. This Prospectus Supplement and the accompanying Prospectus do not
constitute an offer to sell or a solicitation of an offer to buy
any of the securities offered hereby or thereby in any jurisdiction to any
person to whom it is unlawful to make such offer in such jurisdiction.
Neither the delivery of this Prospectus Supplement and the accompanying
Prospectus nor any sales made hereunder or thereunder shall under any
circumstances create any implication that the information contained or
incorporated by reference herein or therein is correct as of any time
subsequent to its date or that there has been no change in the affairs of the
Company since such date.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Page
Incorporation of Certain Documents by Reference S-2
The Company S-5
Recent Developments S-5
Application of Proceeds S-6
Capital Requirements and Financing S-7
Description of Common Stock
Series A and Series B S-7
Common Stock Dividends S-8
Stock Dividend Sale Plan and
Conversion of Common Stock Series A
into Common Stock Series B S-9
Common Stock Price Range S-10
Pro Forma Financial Statements S-11
Certain U.S. Tax Considerations S-16
Underwriting S-19
Experts S-23
PROSPECTUS
Available Information 2
Incorporation of Certain Documents
by Reference 2
Information Concerning Citizens Utilities Company 3
Financial Information 4
Application of Proceeds 6
Capital Requirements and Financing 6
Description of Debt Securities 6
Description of Preferred Stock 12
Description of Common Stock
Series A and Series B 13
Dividends 13
Stock Dividend Sale Plan 14
Transfer Agent 14
Common Stock Price Range 15
Pro Forma Financial Statements 16
Experts 19
Legal Opinions 19
Plan of Distribution 19
<PAGE>
17,000,000 Shares
Common Stock Series A
PROSPECTUS SUPPLEMENT
U.S. Underwriters
Merrill Lynch & Co.
Lehman Brothers
Morgan Stanley & Co.
Incorporated
Smith Barney Inc.
Robert W. Baird & Co.
Incorporated
International Managers
Merrill Lynch International Limited
Lehman Brothers
Morgan Stanley & Co.
International
NatWest Securities Limited
Smith Barney Inc.
January 23, 1995<PAGE>
Consent of Independent Public Accountants
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation in
the Form 8-K of our reports with respect to the financial statements of
Navajo Communications Company, Inc., ALLTEL Nevada, Inc. and Mountain State
Telephone Company for the two years ended December 31, 1993, dated January
1, 1994, and to the incorporation by reference in Amendment Number three to
the Form S-3 registration statement dated March 28,1 994 (File No. 33-51529).
It should be noted that we have not audited any financial statements of the
companies referred to above subsequent to December 31, 1993 or performed any
audit procedures subsequent to the date of our reports.
Little Rock, Arkansas
December 21, 1994
