SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1996
Citizens Utilities 401(k) Savings Plan
(Full title of the Plan)
Citizens Utilities Company
High Ridge Park, Stamford, Connecticut 06905
(Name of issuer of the securities held pursuant to the Plan
and address of its principal executive office)
Commission File Number 001-11001
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Plan Administrator has caused this Annual Report to be signed by the duly
authorized undersigned thereunto duly authorized.
Date: June 26, 1997 By: Citizens Utilities Company,
Plan Administrator of the
Citizens Utilities 401(k)
Savings Plan
By: Livingston E. Ross
Livingston E. Ross
Vice President and Controller
<PAGE>
Citizens Utilities 401(k) Savings Plan
Index to Financial Statements and Schedules
Page
----
Independent Auditors' Report 3
Financial Statements:
Statements of Net Assets Available for Benefits
December 31, 1996 and 1995 4
Statement of Changes in Net Assets Available for Benefits with Fund
Information for the Year Ended December 31, 1996 5
Notes to Financial Statements 6-10
Schedules:*
I -Item 27a - Schedule of Assets Held for Investment Purposes 11
II -Item 27d - Schedule of Reportable Transactions for the
Year Ended December 31, 1996 12
Independent Auditors' Consent Exhibit 23
*Certain schedules omitted due to absence of conditions under which they are
required.
Page 2
<PAGE>
Independent Auditors' Report
----------------------------
Citizens Utilities Company, Plan Administrator of the
Citizens Utilities 401(k) Savings Plan:
We have audited the accompanying Statements of Net Assets Available for Benefits
of the Citizens Utilities 401(k) Savings Plan as of December 31, 1996 and 1995,
the related Statement of Changes in Net Assets Available for Benefits for the
year ended December 31, 1996 and the supplemental schedules. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 1996 and 1995 and the changes in net assets available for benefits
for the year ended December 31, 1996 in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of Items
27a-Schedule of Assets Held for Investment Purposes, and Item 27d-Schedule of
Reportable Transactions are presented for the purposes of additional analysis
and are not a required part of the basic financial statements but are
supplementary information required by the Department of Labor Rules and
Regulations of Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The Fund Information is presented for the purpose of
additional analysis and is not a required part of the basic financial
statements. The supplemental schedules and Fund Information have been subjected
to the auditing procedures applied in the audits of the basic financial
statements and, in our opinion, are fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
KPMG PEAT MARWICK LLP
New York, New York
June 26,1997
Page 3
<PAGE>
Citizens Utilities 401(k) Savings Plan
Statements of Net Assets Available for Benefits
at December 31, 1996 and 1995
<TABLE>
<CAPTION>
<S> <C> <C>
Assets 1996 1995
- ------ ---- ----
Investment:
Stock Fund - at market value
(Cost $10,880,851 in 1996 and $8,418,006 in 1995) $9,901,993 $ 8,247,322
Guaranteed Income Fund - at contract value 7,077,374 5,387,403
Equity Fund - at market value
(Cost $4,277,123 in 1996 and $2,698,976 in 1995) 5,640,835 3,310,371
Bond Fund - at market value
(Cost $698,325 in 1996 and $527,125 in 1995) 717,570 558,131
Loans receivable 841,723 571,119
Cash and cash equivalents 87,646 324,489
Employer's contribution receivable 620,673 669,028
Participants' contribution receivable 299,177 292,817
Other receivables 98,963 62,377
----------- -----------
Total Assets $25,285,954 $19,423,057
----------- -----------
Liabilities
- -----------
Account Payable -- --
----------- -----------
Total Liabilities -- --
----------- -----------
Net Assets Available for Benefits $25,285,954 $19,423,057
=========== ===========
See accompanying notes to financial statements
</TABLE>
Page 4
<PAGE>
Citizens Utilities 401(k) Savings Plan
Statement of Changes in Net Assets Available for Benefits with Fund Information
Year Ended December 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Guaranteed
Stock Income Equity Bond
Fund Fund Fund Fund Loans Total
--------- ---------- ----------- --------- --------- --------------
Investment Income:
Dividends $ -- $ -- $ 118,275 $ -- $ -- $ 118,275
Interest 21,877 40,781 8,302 47,344 775 119,079
Net (Depreciation)
Appreciation in
Fair Value of Investments (580,114) 374,780 826,569 (10,324) -- 610,911
Contributions:
Participants' 1,383,548 1,078,553 885,025 163,461 -- 3,510,587
Employer 1,230,912 10,194 4,078 1,265 -- 1,246,449
----------- ----------- ---------- --------- --------- -----------
Total Contributions 2,614,460 1,088,747 889,103 164,726 -- 4,757,036
Net transfers - other (737,141) (43,348) 559,103 (69,355) 290,741 --
Net transfers - loans 2,487 2,567 2,774 496 (8,324) --
Distribution:
Benefits Paid to Participants (117,631) (133,319) (58,281) (6,675) (17,782) (333,688)
Participants' contributions
used for life insurance
premium payments (1,702) (1,790) (350) (104) -- (3,946)
------------ ----------- ---------- -------- --------- -----------
Total Distribution (119,333) (135,109) (58,631) (6,779) (17,782) (337,634)
------------ ----------- ---------- -------- --------- -----------
Changes in Net Assets before
Transfers 1,202,236 1,328,418 2,345,495 126,108 265,410 5,267,667
------------ ----------- ----------- --------- --------- -----------
Transfers into Plan:
ALLTEL Savings Plan 178,213 363,170 18,995 29,658 5,194 595,230
Net Assets
Available for Benefits:
Beginning of year 9,354,282 5,492,319 3,429,304 576,033 571,119 19,423,057
------------ ----------- ----------- --------- --------- ------------
End of year $ 10,734,731 $ 7,183,907 $ 5,793,794 $ 731,799 $ 841,723 $ 25,285,954
============ =========== =========== ========= ========= ============
</TABLE>
Page 5
<PAGE>
Citizens Utilities 401(k) Savings Plan
Notes to Financial Statements
Years Ended December 31, 1996 and 1995
(1) Description of the Plan
-----------------------
The following brief description of the Citizens Utilities
Company (the "Company") 401(k) Savings Plan (the "Plan")
provides general information. Participants should refer to the
Plan document for a more comprehensive description of the
Plan's provisions.
a. General. Employees of the Company or its subsidiaries whose
terms and conditions of employment are determined under
collective bargaining agreements are entitled to participate
in the Plan. Enrollment dates are on January 1 and July 1 of
each year. At December 31, 1996 there were 1,790 employees
eligible to participate in the Plan and 1,638 are
participating in the Plan. The Plan is subject to provisions
of the Employee Retirement Act of 1974 (ERISA).
b. Contributions. Eligible employees may contribute up to 16%
of their annual compensation through payroll deductions,
subject to certain maximum contribution restrictions.
Participants who maintained life insurance coverage after
January 1, 1992 may continue to elect to make specific dollar
allocations to purchase life insurance coverage. Contributions
may be apportioned in 5% increments to any combination of the
four investment options specified below. At December 31, 1996
the number of accounts in each fund option was as follows:
Number of
Accounts
--------
Investment Option:
Stock Fund 1,519
Guaranteed Income Fund 1,058
Equity Fund 297
Bond Fund 739
Loan Fund 240
Life Insurance 12
Certain bargaining units are entitled to receive a Company
contribution equal to 50% of the first 6% of each
Participant's annual base compensation (as defined by the
Plan) that a participant contributes to the Plan. Effective
July 1, 1993 the Company contributions are invested entirely
in the Stock Fund, unless a participant is age 55 or older in
which case they may elect to have the Company contribution
invested in the same investments as their own contributions
and may transfer previous Company contributions invested in
Citizens Series B Common Stock Fund to other investment
options.
c. Participant accounts. Each participant's account is
credited with the participant's contribution and an allocation
of the Company contribution and plan earnings or losses.
Allocations are based on each participant's contribution, as
defined. The benefit to which a participant is entitled is the
amount which can be provided from the participant's account.
Page 6
<PAGE>
Citizens Utilities 401(k) Savings Plan
Notes to Financial Statements
Years Ended December 31, 1996 and 1995
d. Vesting. Participants are at all times fully vested in
their own contributions and the allocated earnings thereon.
Participants eligible for Company contributions become 100%
vested in the Company contributions and the related earnings
on the Company's contributions upon disability, death,
attainment of normal retirement age or after five years of
service. For any other termination of employment, the vesting
schedule is as follows:
Vested Percentage
of Company
Contributions and
Years of Service Related Earnings
---------------- ----------------
Less than 2 years 0%
2 years but less than 3 years 40%
3 years but less than 4 years 60%
4 years but less than 5 years 80%
5 years or more 100%
e. Investment options. The Plan provides participants with the
following investment options: a Company Common Stock Series B Stock
Fund, a Guaranteed Income Fund, an Equity Fund, a Bond Fund and Life
Insurance. A description of each Fund follows:
Stock Fund:
The Stock Fund invests in shares of the Company's Common Stock
Series B. Stock dividends are paid on Common Stock Series B in
additional full and fractional shares. Stock dividends are not
reported as dividend income in the Statement of Changes in Net
Assets Available for Benefits, rather, stock dividends are
capital transactions which have the effect of increasing plan
shares and decreasing per share cost. Shares received from
stock dividends were 50,184 in 1996 and 33,467 in 1995.
Guaranteed Income Fund:
Contributions to the Guaranteed Income Fund have been invested
in the following Guaranteed Income Contracts:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Annual
Compound
Maturity Rate of
Contribution Period Guaranteed Income Contract Issuer Date Return
------------------- --------------------------------- -------- ------
Various PNC Bank Guaranteed
Investment Contract Fund N/A Various
7/1/96 to 6/30/97 Principal Mutual Life Insurance Company 6/29/02 7.16%
7/1/96 CIGNA 6/30/01 7.14%
11/1/95 to 6/30/96 Allstate Life Insurance Company 6/30/00 6.14%
1/18/95 Allstate Life Insurance Company 6/30/00 8.11%
9/08/94 New York Life Insurance Company 6/30/99 7.11%
7/1/94 to 6/30/95 John Hancock Mutual Life Insurance Company 6/30/98 6.94%
7/1/93 to 6/30/94 Principal Mutual Life Insurance Company 6/30/99 5.60%
7/1/92 to 6/30/93 Pacific Mutual Life Insurance Company 6/10/97 7.30%
7/1/91 to 6/30/92 General American Life Insurance Company 6/30/96 8.30%
</TABLE>
Page 7
<PAGE>
Citizens Utilities 401(k) Savings Plan
Notes to Financial Statements
Years Ended December 31, 1996 and 1995
Participants in the Guaranteed Income Fund receive a
blended interest rate calculated using a weighted
average of contract assets and the above annual
compound rates of return. The blended interest rate is
projected using assets in the above contracts and
varies as contracts mature, as new contracts are
purchased and with deposit and withdrawal experience.
Equity Fund:
Contributions to the Equity Fund are invested in the
Index Trust 500 Portfolio managed by Vanguard Group.
This fund is a passive equity management vehicle which
seeks to replicate the total return of the Standard
and Poor's 500 stock index with dividends reinvested.
Prior to June 30, 1994, contributions were invested in
Capital Initiatives Equity Total Return Account
Contract ("Equity TRAC"). The Equity TRAC's balance
was transferred to the Vanguard Index Trust 500
Portfolio as of June 30, 1994.
Bond Fund:
Contributions to the Bond Fund are invested in the
GNMA Bond Fund managed by Vanguard Group. The GNMA
Bond Fund is primarily comprised of securities backed
by the full faith and credit of the U.S. Government.
Dividends are received in cash and are reinvested in
additional Bond Fund shares.
Life Insurance:
Effective January 1, 1992 the life insurance option
was no longer offered to existing and newly eligible
participants. Prior to 1992, life insurance which may
cover the participant, his/her spouse and dependent
children, was provided by Inter-American Life
Insurance Company ("Inter-American"). Participants who
maintained life insurance policies prior to January 1,
1992 had their coverage remain intact. These
Participants may continue to have up to 25% of their
contributions used to pay all premiums on a selected
amount of life insurance coverage. Insurance
certificates are issued to all Participants selecting
this option and insurance policies are issued to
Participants upon their retirement or termination.
f. Participant Loans. Participants in the Plan for two years
or more may request to borrow up to the lesser of 50% of
his/her vested account balance or $50,000, in both cases
limited to the Participant's salary deferral account balance
on the valuation date preceding the date on which the loan is
made. The loans are allocated to a Loan Fund. The interest
rate paid by the participant is equal to the prime interest
rate in effect at the beginning of the month in which the loan
is approved and remains fixed at that rate for the term of the
loan. Loan repayments are made through payroll deductions and
are credited to the Participants' accounts as the payments are
made. In the event of termination of employment, a
Participant's loan note may be repaid in full or will be
canceled and the Participant's distribution reduced by the
amount of the outstanding loan balance.
Page 8
<PAGE>
Citizens Utilities 401(k) Savings Plan
Notes to Financial Statements
Years Ended December 31, 1996 and 1995
g. Payment of Benefits. Upon termination of employment, a Participant
is entitled to receive payment in full of the vested portion of
his/her account. If the value of the terminating Participant's account
exceeds $3,500, the Participant may elect to defer distribution. Prior
to January 1, 1997, the distribution must have begun on or before
April 1st of the calendar year following the year the Participant
attained age 70 1/2. After December 31, 1996, the distribution must
begin either on or before April 1st of the year following the year the
participant attains age 70 1/2 or if the participant is still employed
by the Company, on or before April 1st of the calendar year after the
year in which the participant retires.
h. Forfeitures. At December 31, 1996 and 1995, forfeited nonvested
Company contribution totaled $4,663 and $658, respectively. These
amounts are used to reduce the future obligation of the Company to
make contributions to the Plan.
i. Administration Costs. Plan administration costs are paid by the
Company.
(2) Summary of Accounting Policies
------------------------------
(a) Basis of Accounting
--------------------
The financial statements of the Plan are prepared under the
accrual method of accounting. The Fund Information reflected
in the Statement of Changes in Net Assets includes the
application of assets to the applicable funds as directed by
the participants as of December 31, 1996 and 1995.
(b) Use of Estimate
---------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amount of assets and liabilities at the date of the financial
statements and the reported amount of additions and deductions
during the reporting period. Actual results could differ from
these estimates.
(c) Investment Valuation,Income Recognition and Payment of Benefits
---------------------------------------------------------------
The Plan's investments are stated at fair value, except for
investment contracts in the Guaranteed Income Fund, which is
valued at contract value. Shares of registered investment
companies are valued at quoted market prices, which represent
the net asset value of shares held by the Plan at year end.
The Company stock is valued at its quoted market price.
Participant notes receivable are valued at cost, which
approximates fair value.
Purchases and sales of securities are recorded on a trade-date
basis. Interest income is recorded on the accrual basis.
Dividends are recorded on the payment date. Benefits are
recorded when paid.
(d) Reclassifications
-----------------
Certain 1995 balances have been reclassified to conform to the
1996 presentation.
Page 9
<PAGE>
Citizens Utilities 401(k) Savings Plan
Notes to Financial Statements
Years Ended December 31, 1996 and 1995
(3) Investment of 5% or more of the Net Assets Available for Plan Benefits
----------------------------------------------------------------------
At December 31, 1996 the Plan had $9,901,993, $7,077,374, $5,640,835
invested in the Stock Fund, Guaranteed Income Fund and Equity Fund,
respectively, which represents an Investment of 5% or more of the Net
Assets Available for Plan Benefits.
(4) Related Party Transactions
--------------------------
Certain Plan investments are shares of mutual funds managed by PNC. PNC is
the trustee as defined by the Plan and therefore, these transactions
qualify as party-in-interest. Fees paid by the Company for investment
management services amounted to $50,464 in 1996.
(5) Transfer from Other Plans
-------------------------
Effective January 1, 1996, participants in the ALLTEL Savings Plan from
the acquired ALLTEL properties in California became participants in the
Plan. Effective April 1, 1996, participants in the acquired ALLTEL
property in Nevada became participants in the Plan. Assets in the ALLTEL
Savings Plan totaling $595,230 transferred to the Plan in 1996.
(6) Termination of Plan
-------------------
The termination of the Plan is governed by collective bargaining
agreements and the terms of the Employee Retirement Income Security Act of
1974 ("ERISA").
(7) Tax Status
----------
The Plan has received a favorable determination letter from the Internal
Revenue Service dated January 25, 1995, stating that the Plan is qualified
under Section 401(a) of the Internal Revenue Code (the Code) and the
related trust is tax exempt under Section 501(a) of the Code.
Page 10
<PAGE>
Schedule I
Citizens Utilities 401(k) Savings Plan
Item 27a - Schedule of Assets Held for Investment Purposes
December 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Identity of Issuer, Number Cost or Market or
Borrowers, Lesser, of Contract Contract
or Similar Party Description of Assets Shares Value Value
- -------------------------------- --------------------- ------ ----- ------
Stock Fund
----------
Citizens Utilities Company Citizens Utilities Company
Common Stock Series B 890,067 $10,880,851 $9,901,993
======= =========== ==========
Guaranteed Income Fund
----------------------
Allstate Life Insurance Company Guaranteed Income Contract 1,010,480 1,010,480
Allstate Life Insurance Company Guaranteed Income Contract 561,410 561,410
CIGNA Guaranteed Income Contract 519,997 519,997
John Hancock Mutual Life Ins. Co. Guaranteed Income Contract 921,593 921,593
New York Life Insurance Company Guaranteed Income Contract 1,360,408 1,360,408
Pacific Mutual Life Insurance Company Guaranteed Income Contract 329,144 329,144
PNC Bank Guaranteed Income Fund 1,220,412 1,220,412
Principal Mutual Life Ins. Company Guaranteed Income Contract 390,786 390,786
Principal Mutual Life Ins. Company Guaranteed Income Contract 763,144 763,144
--------- ---------
Total Guaranteed Income 609,577 $7,077,374 $7,077,374
======= ========== ==========
Equity Fund
-----------
Vanguard Group Vanguard Index Trust Fund 81,562 $4,277,123 $5,640,835
======= ========== ==========
Bond Fund
---------
Vanguard Group Vanguard GNMA Fund 70,212 $ 698,325 $ 717,570
======= ========== ==========
Loan Fund
---------
Participants' Loans Receivable $ 841,723 $ 841,723
========== ==========
Cash
----
Compass Capital Compass Capital Money Market Fund $ 87,646 $ 87,646
========== ==========
See Independent Auditors' Report
Page 11
</TABLE>
<PAGE>
Schedule II
Citizens Utilities 401(k) Savings Plan
Item 27d - Schedule of Reportable Transactions
For Plan Year Ended December 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Current
Expenses Value of Asset
Purchase Selling Lease Incurred with Cost of on Transac- Net Gain/
Issuer Description of Asset Price Price Rental Transaction Asset tion Date (Loss)
- ------ -------------------- ----------- -------- ------ ----------- -------- ---------- --------
Vanguard Vanguard GNMA $ 297,871 $ - $ - $ - $ 297,871 $ 297,871 $ -
Vanguard Vanguard GNMA - 128,176 - - 127,177 128,176 999
Vanguard Vanguard Index Trust 2,225,492 - - - 2,225,492 2,225,492 -
Vanguard Vanguard Index Trust - 721,595 - - 664,521 721,595 57,074
Citizens Utilities Citizens Utilities Company
Company Series B Common Stock 2,803,618 - - - 2,803,618 2,803,618 -
Citizens Utilities Citizens Utilities Company
Company Series B Common Stock - 575,264 - - 616,463 575,264 (41,199)
PNC Bank Investment Contract Fund 2,596,698 - - - 2,596,698 2,596,698 -
PNC Bank Investment Contract Fund - 1,956,928 - - 1,928,287 1,956,928 28,641
PNC Bank PNC Short Term
Investment Fund 3,210,875 - - - 3,210,875 3,210,875 -
PNC Bank PNC Short Term
Investment Fund - 3,532,810 - - 3,532,810 3,532,810 -
Allstate Allstate 863,122 - - - 863,122 863,122 -
Allstate Allstate - 107,776 - - 107,776 107,776 -
Compass Capital Compass Capital
Money Market 3,103,351 - - - 3,103,351 3,103,351 -
Compass Capital Compass Capital
Money Market - 2,945,343 - - 2,945,343 2,945,343 -
Principal Mutual Principal Mutual 759,067 - - - 759,067 759,067 -
</TABLE>
See Independent Auditors' Report
Page 12
Independent Auditors' Consent
The Board of Directors
Citizens Utilities Company:
We consent to incorporation by reference in the registration statement (No.
33-37602) on Form S-8 of Citizens Utilities Company of our report dated June 26,
1997, relating to the Statements of Net Assets Available for Benefits of the
Citizens Utilities 401(k) Savings Plan as of December 31, 1996 and 1995 and the
related statement of Changes in Net Assets Available for Benefits and
supplemental schedules for the year then ended December 31, 1996, which report
appears in the December 31,1996 annual report on Form 11-K of Citizens Utilities
401(k) Savings Plan.
KPMG PEAT MARWICK LLP
New York, New York
June 26, 1997
