PROSPECTUS SUPPLEMENT
(To Prospectus Dated July 3, 1996)
$200,000,000
[Company Logo]
7.05% Debentures Due 2046
-------------------------
Interest payable April 1 and October 1
--------------------------------------
The Offered Debentures may not be redeemed prior to maturity by the Company and
do not provide for any sinking fund. The Offered Debentures will be
represented by a global debenture registered in the name of a
nominee of The Depository Trust Company, New York, New
York, as Depositary (the "Depositary"). Beneficial
interests in the Offered Debentures will be shown
on, and transfers thereof will be effected
only through, records maintained by the
Depositary and its participants. Except
as described in the accompanying
Prospectus, Offered Debentures
in certificated form will not
be issued in exchange for
the global debenture.
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.
------------------------------
Underwriting
Price to Discounts and Proceeds to
Public(1) Commissions(2) Company(1)(3)
------------ ------------- -------------
Per Debenture .... 99.739% 1.00% 98.739%
Total ............ $199,478,000 $2,000,000 $197,478,000
(1) Plus accrued interest, if any, from December 6, 1996 to date of delivery.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(3) Before deducting expenses payable by the Company estimated to be $87,000.
-------------------------------
The Offered Debentures offered by this Prospectus Supplement are offered by the
Underwriters subject to prior sale, withdrawal, cancellation or modification of
the offer without notice, to delivery to and acceptance by the Underwriters and
to certain further conditions. It is expected that delivery of the Offered
Debentures will be made on or about December 6, 1996, through the book-entry
facilities of the Depositary, against payment therefor in immediately available
funds.
Lehman Brothers Smith Barney Inc.
Morgan Stanley & Co.
Incorporated
December 3, 1996
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
DEBENTURES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 ("1934 Act") and in accordance therewith files
reports, proxy and information statements and other information with the
Securities and Exchange Commission (the "SEC"). Such reports, proxy and
information statements and other information can be inspected and copied at the
public reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at its regional offices at, Citicorp Center, Suite
1400, 500 West Madison Street, Chicago, Illinois 60661 and Suite 1300, 7 World
Trade Center, New York, New York 10048. Copies of such material can also be
obtained from the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D. C. 20549, at prescribed rates. The SEC also maintains a web site
(htp://www.sec.gov) that contains reports, proxy and information statements and
other information regarding the Company. Certain securities of the Company are
listed on the New York Stock Exchange, 20 Broad Street, New York, New York
10005, and reports, proxy material and other information concerning the Company
may be inspected at the office of that Exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the SEC pursuant to
the 1934 Act are incorporated into this Prospectus Supplement and the Prospectus
by reference:
The Company's Annual Report on Form 10-K for the year ended December
31, 1995.
The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, June 30 and September 30, 1996.
The Company's Current Reports on Form 8-K filed on March 29, and May
28, 1996.
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 Treasurer, Citizens Utilities Company, High Ridge Park, Bldg. No. 3,
Stamford, Connecticut 06905 (telephone 203-329-8800).
S-2
<PAGE>
Consolidated Summary Financial Information
(In millions, except percentages, ratios and per-share amounts)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Twelve Months
Ended
September 30, 1996 Year Ended December 31,
------------------------------ ------------------------------
INCOME STATEMENT DATA 1995 1994 1993
- --------------------- -------- -------- -------
Revenues $1,258 $1,069 $906 $613
Net Income $170 $160 $144 $126
Earnings per Share of Common Stock
Series A and Series B(1) $.74 $.70 $.69 $.61
Ratio of Earnings to Fixed Charges(2) 3.6 3.4 3.7 5.3
As at December 31,
-----------------------------------------
CAPITALIZATION DATA As at September 30, 1996 1995 1994 1993
- ------------------- ---------------------------- ----- ---- ----
Long-Term Debt $1,388 $1,187 $994 $548
Equity(3) $1,844 $1,560 $1,157 $974
Long-Term Debt to Long-Term
Debt and Equity 43% 43% 46% 36%
</TABLE>
- -------------------------------
(1) Common Stock Series A and Series B per-share amounts have been adjusted
retroactively for subsequent stock dividends and stock splits through September
30, 1996. No adjustment has been made for Citizens' 1.6% 1996 fourth quarter
stock dividend, as this adjustment is immaterial.
(2)"Earnings" consist of income before income taxes plus fixed charges. "Fixed
Charges" consist of interest charges and an amount representing the interest
factor included in rentals.
(3) Includes shareholders' equity and Company Obligated Mandatorily
Redeemable Convertible Preferred Securities.
S-3
<PAGE>
CITIZENS UTILITIES COMPANY
Citizens Utilities Company (the "Company" or "Citizens") is a
diversified operating company which provides, either directly or through
subsidiaries, telecommunications, natural gas transmission and distribution,
electric distribution, water or wastewater services to customers in areas of
twenty states. Divisions of Citizens provide electric distribution and natural
gas transmission and distribution services, purchasing most of the electric
power needed and all gas supplies. Telecommunications, water and wastewater
services are provided either by divisions of Citizens or by its subsidiaries.
Citizens is the fifteenth largest local telecommunications company in the
nation. Citizens holds a significant investment interest in Centennial Cellular
Corp., a cellular telephone company, and owns Electric Lightwave, Inc., an
alternative telecommunications service provider operating in five western
states, and Citizens Long Distance. Beginning with 1945, the Company has
increased its revenues, net income and earnings per share (as adjusted for
subsequent stock dividends and stock splits) every year without interruption.
The Company, with administrative offices at High Ridge Park, Bldg.
No. 3, Stamford, Connecticut 06905 (telephone 203-329-8800), was incorporated in
Delaware in 1935 to acquire the assets and business of a predecessor
corporation. Since then, the Company has grown as a result of investment in its
own operations and the acquisition of numerous additional operations.
As a result of its diversification, the Company is not dependent upon
any single geographic area or any one type of service for its revenues. No
single state regulatory body regulates a utility service of the Company
accounting for more than 11% of the Company's revenues for the twelve months
ended September 30, 1996. The Federal Communications Commission regulates
interstate telecommunications access services of the Company under price cap
regulation which allows the Company considerable flexibility in its pricing. 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 small and medium-sized communities. 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 over 1,800,000 as of September 30, 1996.
The Company continually considers and is carrying out expansion
through acquisitions and joint ventures in the rapidly evolving
telecommunications and cable television industries and in traditional public
utility and related businesses.
APPLICATION OF PROCEEDS
The net proceeds from the sale of the Offered Debentures will be used
to repay outstanding commercial paper, to fund and to prefund capital
expenditures for the construction, extension and improvement of the Company's
facilities and services, and for general corporate purposes.
S-4
<PAGE>
RATINGS OF COMPANY SECURITIES
Standard & Poor's Ratings Group, a division of McGraw-Hill
("Standard & Poor's"), Fitch Investors Services, Inc. ("Fitch") and Duff &
Phelps Credit Rating Co. ("Duff & Phelps") have rated the Offered Debentures
"AA+" and Moody's Investors Service, Inc. ("Moody's") has rated the Offered
Debentures "Aa3".
Standard & Poor's has also rated the Company's outstanding publicly
held Debentures and Industrial Development Revenue Bonds "AA+"; its Company
Obligated Mandatorily Redeemable Convertible Preferred Securities "AA"; its
commercial paper "A-1+"; and has ranked the Company's Common Stock "A+". Fitch
has also rated the Company's outstanding publicly held Debentures and Industrial
Development Revenue Bonds "AA+"; its Company Obligated Mandatorily Redeemable
Convertible Preferred Securities "AA"; and its commercial paper "F-1+". Duff &
Phelps has also rated the Company's outstanding publicly held Debentures and
Industrial Development Revenue Bonds "AA+"; its Company Obligated Mandatorily
Redeemable Convertible Preferred Securities "AA"; and its commercial paper
"D-1+". Moody's has assigned ratings of "Aa3" to the Company's outstanding
publicly held Debentures; "aa3" to its Company Obligated Mandatorily Redeemable
Convertible Preferred Securities; and "P-1" to the Company's commercial paper.
Moody's, Fitch and Duff & Phelps do not rank or rate Common Stock. Each of the
commercial paper ratings and the Common Stock ranking is the highest rating of
such rating agency.
An explanation of the significance of ratings may be obtained from the
rating agencies. Generally, rating agencies base their ratings on such material
and information, and such of their own investigation, studies and assumptions,
as they deem appropriate. A credit rating of a security is not a recommendation
to buy, sell or hold securities. There is no assurance that any rating will
apply for any given period of time or that a rating may not be adjusted or
withdrawn.
CAPITAL REQUIREMENTS AND FINANCING
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 will require approximately $340 million in 1997. 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 will be financed from
internally generated funds, other offered securities, the issuance of taxable
and tax-exempt long-term debt, short-term borrowings, customer advances, and
contributions in aid of construction.
The Company maintains $600 million of committed bank lines of credit
for general corporate purposes under which there were no amounts outstanding as
of December 3, 1996.
S-5
<PAGE>
DESCRIPTION OF OFFERED DEBENTURES
The following description of the particular terms of the Offered
Debentures supplements the description of the general terms and provisions of
the Offered Debentures set forth in the accompanying Prospectus under the
caption "Description Of The Debt Securities".
General
The Offered Debentures will be issued under the Company's Indenture
with The Chase Manhattan Bank (formerly known as Chemical Bank), as Trustee,
dated August 15, 1991 as supplemented by an Eighth Supplemental Indenture, dated
as of December 1, 1996, creating the Offered Debentures (the "Indenture"). The
Offered Debentures will be issued in the aggregate principal amount of
$200,000,000 and will bear the designation "7.05% Debentures Due 2046". The
Offered Debentures will bear interest at the annual rate of 7.05%, payable on
April 1 and October 1 of each year, commencing April 1, 1997, to the person in
whose name the Offered Debentures are registered at the close of business on the
preceding March 15 or September 15, as the case may be. The Offered Debentures
will mature on October 1, 2046.
The Offered Debentures may not be redeemed prior to maturity by the
Company and do not provide for any sinking fund. The Offered Debentures will not
be secured and will rank equally with any other indebtedness which is issued
under the Indenture and not specifically subordinated to the Offered Debentures.
The Offered Debentures will also rank equally with the unsecured obligations of
the Company except as noted in the accompanying Prospectus.
The Offered Debentures will be held by the owners as book-entry
securities (see "Description Of The Debt Securities -- Book-Entry Debt
Securities" in the accompanying Prospectus).
Concerning the Trustee
The Chase Manhattan Bank, the Trustee under the Indenture under which
the Offered Debentures and currently outstanding Debentures are issued, has
periodically engaged in transactions with, or performed services for, the
Company in the ordinary course of business. The Chase Manhattan Bank is also the
trustee under an indenture dated January 15, 1996, as supplemented, pursuant to
which $211,756,050 of principal amount of debentures issued to a wholly owned
subsidiary of the Company are outstanding. The Chase Manhattan Bank is also the
agent and a participant lender under the Company's committed bank lines of
credit arrangements, under which no amounts were outstanding as of the date
hereof.
S-6
<PAGE>
UNDERWRITERS
Under the terms and subject to conditions set forth in the Underwriting
Agreement dated the date hereof, the Company has agreed to sell to each of the
Underwriters named below, severally, and each of the Underwriters has severally
agreed to purchase the principal amount of the Offered Debentures set forth
opposite its name below:
Principal
Amount of
Underwriters Debentures
------------ -----------
Lehman Brothers Inc............................................... $ 68,000,000
Morgan Stanley & Co. Incorporated................................... 66,000,000
Smith Barney Inc.................................................... 66,000,000
----------
Total................................................. $200,000,000
===========
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the Offered Debentures are
subject to the approval of certain legal matters by counsel and to certain other
conditions. The nature of the Underwriters' obligations is such that they are
committed to take and pay for all the Offered Debentures if any are taken.
The Underwriters propose to offer part of the Offered Debentures
directly to the public at the public offering price set forth on the cover page
hereof and in part to selected dealers at a price which represents a concession
not in excess of .50% of the principal amount of the Offered Debentures under
the public offering price. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of .25% of the principal amount of the
Offered Debentures to certain other dealers. After the initial offering of the
Offered Debentures, the public offering price and concessions may be changed.
The Company does not intend to apply for listing of the Offered
Debentures on a national securities exchange, but has been advised by the
Underwriters that they presently intend to make a market in the Offered
Debentures, as permitted by applicable laws and regulations. The Underwriters
are not obligated, however, to make a market in the Offered Debentures and any
such market-making may be discontinued at any time at the sole discretion of
each of the Underwriters. Accordingly, no assurance can be given as to the
liquidity of the trading market for the Offered Debentures.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
S-7
<PAGE>
LEGAL OPINIONS
The validity of the Securities will be passed upon by Winthrop,
Stimson, Putnam & Roberts, One Battery Park Plaza, New York, New York, counsel
for the Company, and by Simpson Thacher & Bartlett (a partnership which includes
professional corporations), 425 Lexington Avenue, New York, New York, counsel
for the Underwriters. Legal matters relating to required authorization, if any,
of the Securities by the public utilities commissions in the various states will
be passed upon by local counsel to the Company in the states of Arizona,
Colorado, Hawaii, Louisiana and Vermont. Winthrop, Stimson, Putnam & Roberts and
Simpson Thacher & Bartlett may rely upon such counsel as to certain matters
governed by the laws of such states.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1995, 1994 and 1993, and for each of the years then ended, incorporated by
reference in this Prospectus Supplement from the Company's Annual Report on Form
10-K, have been so incorporated by reference in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
S-8
<PAGE>
===========================================================
No dealer, salesman or other person has been
authorized to give any information or to make any
representation not contained in this Prospectus
Supplement or the accompanying Prospectus and, if given
or made, such information or representation must not be
relied upon as having been authorized by the Company, or
any agent or underwriter. 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 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 or the accompanying Prospectus nor any sale
made hereunder or thereunder shall, under any
circumstances, create any implication that there has been
no change in the affairs of the Company since the date
hereof or thereof.
__________________________
TABLE OF CONTENTS
Prospectus Supplement
Page
----
Available Information ......................S-2
Incorporation of Certain Documents by
Reference ..................................S-2
Consolidated Summary Financial Information.......S-3
Citizens Utilities Company .....................S-4
Application of Proceeds..........................S-4
Ratings of Company Securities....................S-5
Capital Requirements and Financing...............S-5
Description of Offered Debentures................S-6
Underwriters ....................................S-7
Legal Opinions...................................S-8
Experts ........................................S-8
Prospectus
Available Information............................ 2
Incorporation of Certain Documents by
Reference................................... 3
Citizens Utilities Company....................... 3
Financial Information............................ 4
Application of Proceeds.......................... 6
Capital Requirements and Financing............... 6
Description of the Debt Securities............... 6
Description of the Preferred Stock...............12
Description of the Common Stock
Series A and Series B.......................13
Dividends on Common Stock
Series A and Series B.......................13
Stock Dividend Sale Plan and Conversion of
Common Stock Series A into Series B.........14
Common Stock Price Range.........................15
Common Stock Transfer Agent.....................15
Pro Forma Statements of Income...................16
Legal Opinions...................................19
Experts ........................................19
Plan of Distribution.............................19
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<PAGE>
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$200,000,000
[Company Logo]
7.05% Debentures Due 2046
- ---------------------
PROSPECTUS SUPPLEMENT
December 3, 1996
- ---------------------
LEHMAN BROTHERS
MORGAN STANLEY & CO.
INCORPORATED
SMITH BARNEY INC.
=======================
