CITIZENS UTILITIES COMPANY
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, 1996
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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, 1996 Commission file number 001-11001
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CITIZENS UTILITIES COMPANY
(Exact name of registrant as specified in its charter)
Delaware 06-0619596
(State or other jurisdiction of (I.R.S.Employer Identification No.)
incorporation or organization)
High Ridge Park
P.O. Box 3801
Stamford, Connecticut 06905
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,including area code(203)329-8800
NONE
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
Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of May 1, 1996.
Common Stock Series A 154,534,996
Common Stock Series B 76,188,062
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CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
INDEX
Page No.
Part I. Financial Information
Consolidated Condensed Balance Sheets
March 31, 1996 and December 31, 1995 2
Consolidated Condensed Statements of Income
for the Three Months Ended March 31, 1996 and 1995 3
Consolidated Condensed Statements of Cash Flows
for the Three Months Ended March 31, 1996 and 1995 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
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
March 31, 1996 December 31, 1995
ASSETS -------------- ----------------
Current assets:
Cash $ 9,724 $ 17,922
Accounts receivable 205,872 199,813
Other 36,774 34,967
------------- --------------
Total current assets 252,370 252,702
------------- --------------
Property, plant and equipment 4,296,854 4,187,354
Less accumulated depreciation 1,342,895 1,279,324
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Net property, plant and equipment 2,953,959 2,908,030
------------- --------------
Investments 364,678 329,090
Regulatory assets 180,639 180,572
Deferred debits and other as 261,348 247,793
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Total assets $ 4,012,994 $ 3,918,187
============= ==============
LIABILITIES AND EQUITY
Current liabilities:
Long-term debt due within one year $ 3,027 $ 3,865
Short-term debt - 140,650
Other 348,229 359,163
------------ --------------
Total current liabilities 351,256 503,678
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Customer advances for construction and
contributions in aid of construction 225,388 223,923
Deferred income taxes 326,329 314,094
Regulatory liabilities 27,746 28,279
Deferred credits and other liabilities 103,028 101,300
Long-term debt 1,194,114 1,187,000
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Total liabilities 2,227,861 2,358,274
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Company Obligated Mandatorily Redeemable
Convertible Preferred Securities * 201,250 -
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Shareholders' Equity:
Common stock issued, $.25 par value
Series A 38,749 38,839
Series B 18,827 18,057
Additional paid-in capital 1,290,617 1,263,694
Retained earnings 230,122 235,236
Unrealized gain on securities
classified as available for sale 5,568 4,087
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Total equity 1,583,883 1,559,913
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Total liabilities and
shareholders' $ 4,012,994 $ 3,918,187
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* Represents securities of a subsidiary trust, the sole assets of which are
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 Financial Statements.
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PART I. FINANCIAL INFORMATION (Continued)
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(In thousands, except per-share amounts)
1996 1995
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Revenues $ 329,138 $ 267,034
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Expenses:
Operating expenses 211,116 168,738
Depreciation 47,030 39,394
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258,146 208,132
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Income from operations 70,992 58,902
Other income, net 11,047 12,855
Interest expense 22,003 22,697
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Income before income taxes and dividends
on Company Obligated Mandatorily
Redeemable Convertible Preferred
Securities 60,036 49,060
Income taxes 19,927 15,156
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Income before dividends on convertible
preferred securities 40,109 33,904
Dividends on Company Obligated Mandatorily
Redeemable Convertible Preferred
Securities, net of income tax benefit 1,253 -
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Net Income $ 38,856 $ 33,904
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Earnings per share of common stock
Series A and Series B $ .17 $ .15*
========== =========
Average number of common shares outstanding
for the period:
Series A Common Stock 155,173 156,941*
Series B Common Stock 73,769 64,826*
Dividend rate declared on common stock:
Paid in Series A shares on Series A
Common Stock and in Series B shares
on Series B Common Stock 1.6% 1.5%
========== =========
*Adjusted for subsequent stock dividends
The accompanying Notes are an integral part of these Financial Statements.
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PART I. FINANCIAL INFORMATION (Continued)
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(In thousands)
1996 1995
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Net cash provided by operating activities 72,991 $ 58,722
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Cash flows from investing activities:
Construction expenditures (51,622) (43,523)
Securities purchased (75,088) -
Securities sold 20,132 51,086
Securities matured 17,710 34,423
Business acquisitions (44,200) (4,597)
Other, net 304 758
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(132,764) 38,147
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Cash flows from financing activities:
Long-term debt borrowings 20,548 12,277
Long-term debt principal payments (15,218) (12,247)
Short-term debt repayments (140,650) (350,900)
Issuance of Company Obligated
Mandatorily Redeemable
Convertible Preferred Securities 201,250 -
Issuance of common stock 1,019 258,823
Common stock buybacks (14,477) -
Other (897) 435
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51,575 (91,612)
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(Decrease) increase in cash (8,198) 5,257
Cash at January 1, 17,922 14,224
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Cash at March 31, $ 9,724 $ 19,481
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The accompanying Notes are an integral part of these Financial Statements.
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PART I. FINANCIAL INFORMATION (Continued)
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(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 subsequent stock dividends. 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) During the first quarter of 1996 a consolidated wholly-owned subsidiary
of the Company, Citizens Utilities Trust (the "Trust"), issued, in an
underwritten public offering, 4,025,000 shares of 5% Company Obligated
Mandatorily Redeemable Convertible Preferred Securities due 2036 ("Trust
Convertible Preferred Securities"), representing preferred undivided
interests in the assets of the Trust, with a liquidation preference of $50
per security (for a total liquidation amount of $201,250,000). The proceeds
from the issuance of the Trust Convertible Preferred Securities and a
Company capital contribution were used to purchase $207,475,000 aggregate
liquidation amount of 5% Partnership Convertible Preferred Securities due
2036 from another wholly owned consolidated subsidiary, Citizens Utilities
Capital L.P. (the "Partnership"). The proceeds from the issuance of the
Partnership Convertible Preferred Securities and a Company capital
contribution were used to purchase from the Company $211,756,050 aggregate
principal amount of 5% Convertible Subordinated Debentures Due 2036. The
sole assets of the Trust are the Partnership Convertible Preferred
Securities, and the Company's Convertible Subordinated Debentures are
substantially all the assets of the Partnership. The Company's obligations
under the agreements related to the issuances of such securities, taken
together, constitute a full and unconditional guarantee by the Company of
the Trust's obligations relating to the Trust Convertible Preferred
Securities and the Partnership's obligations relating to the Partnership
Convertible Preferred Securities.
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PART I. FINANCIAL INFORMATION (Continued)
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
(a) Liquidity and Capital Resources
For the three months ended March 31, 1996, the primary source of funds was
from operations. Funds requisitioned from the 1995, 1994 and 1993 Series
Industrial Development Revenue Bond construction fund trust accounts were
used to partially pay for construction of utility plant.
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 3.304 shares of the Company's Common Stock
Series A at a conversion price of $15.133 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 repay
short-term debt, permanently fund a portion of the acquisition of 23,000
telephone access lines in Nevada from ALLTEL Corporation on March 31, 1996
and for other general corporate purposes.
The Company considers its operating cash flows and its ability to raise
debt and equity capital as the principal indictors 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, 1996 as compared to December 31, 1995. The increase
is primarily due to the repayment of outstanding commercial paper with
the proceeds from the issuance of the EPPICS. The company has 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 March
31, 1996.
During the first quarter of 1996, the Company was authorized increases in
annual revenues for properties in Pennsylvania and Louisiana totaling
$6,317,000. The Company has requests for increases in annual revenues
pending before regulatory commissions in Arizona and Hawaii.
(b) Results of Operations
Operating revenues for the three months ended March 31,1996 increased
$62,104,000, or 23%, compared to the like 1995 period primarily due to
increased telecommunications revenues. Telecommunications revenues totaled
$181,753,000, a 29% increase over the 1995 amount of $140,449,000
primarily due to revenues derived from operating properties acquired
since June 30, 1995. Natural gas revenues increased 21% over the prior
year amount primarily due to increased consumption per customer for the
Louisiana Gas Division as a result of colder than normal weather
conditions.
Operating expenses of $211,116,000 for the three months ended March 31,
1996 increased 25% over the 1995 amount of $168,738,000 primarily due
to operating expenses related to the the telecommunications properties
acquired. The increase was also attributable to an increase in natural
gas purchased due to increased consumption and higher gas costs.
Depreciation expense of $47,030,000 for the three months ended
March 31, 1996 increased 19% compared to the like 1995 period primarily
due to increased depreciable plant from the telecommunications property
acquisitions.
Other income, net, of $11,000,000 for the three months ended March 31,
1996 decreased 14% from $12,855,000 reported for the first quarter of 1995
primarily due to a reduction in investment income. Investment income
decreased due to gains taken on the sale of securities in 1995, the
proceeds of which were used to reduce short-term debt.
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PART II. OTHER INFORMATION
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
Item 6. Reports on Form 8-K
(b) The Company filed on Form 8-K dated March 29, 1996, under Item 5
"Other Events" and Item 7 "Exhibits", describing the Fifth and Sixth
Supplemental Indentures, supplemental to the Indenture dated as of August
15, 1991 between Citizens Utilities Company and Chemical Bank (Trustee).
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CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
SIGNATURE
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
(Registrant)
Date May 14, 1996 By: Livingston E.Ross
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Livingston E. Ross
Vice President and Controller
-7-
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 9,724
<SECURITIES> 364,678
<RECEIVABLES> 205,872
<ALLOWANCES> 0
<INVENTORY> 18,588
<CURRENT-ASSETS> 252,370
<PP&E> 4,296,854
<DEPRECIATION> 1,342,895
<TOTAL-ASSETS> 4,012,994
<CURRENT-LIABILITIES> 351,256
<BONDS> 1,194,114
<COMMON> 57,576
201,250
0
<OTHER-SE> 1,526,307
<TOTAL-LIABILITY-AND-EQUITY> 4,012,994
<SALES> 329,138
<TOTAL-REVENUES> 329,138
<CGS> 0
<TOTAL-COSTS> 258,146
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,003
<INCOME-PRETAX> 60,036
<INCOME-TAX> 19,927
<INCOME-CONTINUING> 40,109
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38,856
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.17
</TABLE>
