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 JUNE 30, 1997
<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1997
-------------
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______ to _______
Commission file number 001-11001
---------
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 July 31, 1997.
Common Stock Series A 154,545,915
Common Stock Series B 90,895,428
<PAGE>
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
INDEX
Page No.
--------
Part I. Financial Information
Consolidated Balance Sheets at June 30, 1997 and
December 31, 1996 2
Consolidated Statements of Income for the Three Months Ended
June 30, 1997 and 1996 3
Consolidated Statements of Income for the Six Months Ended
June 30, 1997 and 1996 4
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 1997 and 1996 5
Notes to Financial Statements 6
Management's Discussion and Analysis of Financial Condition and
Results of Operations 7
Part II. Other Information 16
Signature 18
1
<PAGE>
PART I. FINANCIAL INFORMATION
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, 1997 December 31, 1996
------------- -----------------
ASSETS
- ------
Current assets:
Cash $ 17,865 $ 24,230
Accounts receivable, net 240,826 281,650
Other 53,896 63,890
------------- -----------
Total current assets 312,587 369,770
------------- -----------
Property, plant and equipment 4,815,702 4,582,869
Less accumulated depreciation 1,537,330 1,444,817
------------- -----------
Property, plant and equipment 3,278,372 3,138,052
------------- -----------
Investments 443,663 539,152
Regulatory assets 158,218 174,196
Deferred debits and other assets 246,755 301,978
------------- -----------
Total assets $ 4,439,595 $ 4,523,148
============= ===========
LIABILITIES AND EQUITY
- ----------------------
Current liabilities:
Long-term debt due within one year $ 8,700 $ 3,593
Accounts payable and current liabilities 336,075 405,896
------------ -----------
Total current liabilities 344,775 409,489
------------ -----------
Deferred income taxes 373,224 347,975
Customer advances for construction and
contributions in aid of construction 240,597 238,453
Deferred credits 132,385 115,291
Regulatory liabilities 21,600 22,810
Long-term debt 1,557,155 1,509,697
------------- ------------
Total liabilities 2,669,736 2,643,715
------------- ------------
Company obligated mandatorily redeemable
convertible preferred securities * 201,250 201,250
------------- ------------
Shareholders' equity:
Common stock issued, $.25 par value
Series A 38,656 38,811
Series B 22,625 20,977
Additional paid-in capital 1,447,261 1,381,341
Retained earnings 65,934 244,066
Unrealized loss on securities classified
as available for sale (5,867) (7,012)
------------ -----------
Total shareholders' equity 1,568,609 1,678,183
------------ -----------
Total liabilities and shareholders'
equity $ 4,439,595 $ 4,523,148
============ ===========
* Represents securities of a subsidiary trust, the sole assets of which 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.
2
<PAGE>
PART I. FINANCIAL INFORMATION (Continued)
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND 1996
(In thousands, except per-share amounts)
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
------------- --------------
Revenues $ 306,141 $ 318,128
------------- --------------
Expenses:
Operating 406,249 196,845
Depreciation 58,013 47,200
------------- --------------
Total expenses 464,262 244,045
------------- --------------
Income (loss) from operations (158,121) 74,083
Other income, net 6,841 17,776
Interest expense 28,694 22,645
------------- --------------
Income (loss) before income taxes and dividends on
convertible preferred securities (179,974) 69,214
Income taxes (benefit) (57,949) 21,584
------------- --------------
Income (loss) before dividends on convertible preferred securities (122,025) 47,630
Dividends on convertible preferred securities,
net of income tax benefit 1,552 1,379
------------- --------------
Net income (loss) $ (123,577) $ 46,251
============= ==============
Earnings (loss) per share of common stock Series A and B $ (.51) $ .19*
============= ==============
Average number of Series A and B common shares
outstanding for the period 243,708 246,676*
============= ==============
Dividend rate declared on Series A and B common
stock paid in Series A and B shares, respectively 1.60 % 1.60 %
============= ==============
</TABLE>
*Adjusted for subsequent stock dividends.
The accompanying Notes are an integral part of these Financial Statements.
3
<PAGE>
PART I. FINANCIAL INFORMATION (Continued)
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(In thousands, except per-share amounts)
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
-------------- --------------
Revenues $ 678,633 $ 647,265
-------------- --------------
Expenses:
Operating 660,094 407,962
Depreciation 114,579 94,229
-------------- --------------
Total expenses 774,673 502,191
-------------- -------------
Income (loss) from operations (96,040) 145,074
Other income, net 19,125 28,823
Interest expense 55,710 44,647
-------------- --------------
Income (loss) before income taxes and dividends on
convertible preferred securities (132,625) 129,250
Income taxes (benefit) (42,322) 41,511
-------------- --------------
Income (loss) before dividends on convertible preferred securities (90,303) 87,739
Dividends on convertible preferred securities,
net of income tax benefit 3,104 2,632
-------------- --------------
Net income (loss) $ (93,407) $ 85,107
============== ==============
Earnings (loss) per share of common stock Series A and B $ (.39) $ .35 *
============== ==============
Average number of Series A and B common shares
outstanding for the period 242,133 245,225 *
============== ==============
Compounded dividend rate declared on Series A and B
common stock paid in Series A and B shares, respectively 3.23% 3.23%
============== ==============
</TABLE>
*Adjusted for subsequent stock dividends.
The accompanying Notes are an integral part of these Financial Statements.
4
<PAGE>
PART I. FINANCIAL INFORMATION (Continued)
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(In thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
--------------- ----------------
Net cash provided by operating activities $ 101,555 $ 149,813
--------------- ----------------
Cash flows used for investing activities:
Capital expenditures (268,458) (143,605)
Securities purchased (102,807) (175,489)
Securities sold 183,656 33,837
Securities matured 16,282 22,639
Business acquisitions 0 (84,303)
Other 39,878 (16,807)
--------------- ----------------
Net cash used for investing activities (131,449) (363,728)
--------------- ----------------
Cash flows from financing activities:
Long-term debt borrowings 50,598 284,273
Long-term debt principal payments (2,018) (99,021)
Short-term debt repayments 0 (140,650)
Issuance of convertible preferred securities 0 201,250
Issuance of common stock 3,476 3,622
Common stock buybacks to fund stock dividends (28,867) (29,708)
Other 340 3,233
--------------- ----------------
Net cash provided from financing activities 23,529 222,999
--------------- ----------------
Change in cash (6,365) 9,084
Cash at January 1, 24,230 17,922
--------------- ----------------
Cash at June 30, $ 17,865 $ 27,006
=============== ================
</TABLE>
The accompanying Notes are an integral part of these Financial Statements.
5
<PAGE>
PART I. FINANCIAL INFORMATION (Continued)
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(1) Basis of Presentation:
---------------------
The unaudited consolidated financial statements include the accounts of
Citizens Utilities Company and its subsidiaries (the "Company") and
have been prepared in conformity with Generally Accepted Accounting
Principles. The consolidated financial statements include all
adjustments, which consist of normal recurring accruals and the second
quarter charges to earnings discussed in Note 4, necessary to present
fairly the results for the interim periods shown. Certain information
and footnote disclosures have been condensed pursuant to Securities and
Exchange Commission rules and regulations. The results of the interim
periods are not necessarily indicative of the results for the full
year.
(2) Earnings (loss) Per Share:
-------------------------
Earnings (loss) per share is based on the average number of outstanding
shares adjusted for subsequent stock dividends. The effect on earnings
(loss) per share of the exercise of options is immaterial for 1996 and
antidilutive for 1997.
(3) Regulatory Accounting:
---------------------
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) Second Quarter, 1997 Charges to Earnings:
----------------------------------------
In the second quarter of 1997, the Company recorded approximately
$197.3 million of charges to earnings. These charges are related to the
following:
<TABLE>
<CAPTION>
<S> <C>
Curtailment of certain long distance service operations $ 34,600,000
Benefit plan curtailments and related regulatory assets 36,900,000
Telecommunications information systems and software 63,800,000
Regulatory commission orders 45,000,000
Other 17,000,000
----------
Total $197,300,000
</TABLE>
Curtailment of certain long distance service operations includes
expenses and costs related to a reduction in workforce, the curtailment
of sales and marketing initiatives and network lease terminations, as
well as, an additional reserve for uncollectable accounts receivable.
Benefit plan curtailments and related regulatory assets includes
expenses and costs associated with the curtailment of certain employee
benefits and related regulatory assets no longer deemed recoverable as
a result of the benefit plan curtailment and the current regulatory
environment.
Telecommunications information systems and software includes costs
deemed no longer recoverable in the current regulatory environment.
Regulatory commission orders include expenses and costs associated with
recent orders issued by the Vermont, New York and Arizona public
utilities commissions.
6
<PAGE>
PART I. FINANCIAL INFORMATION (Continued)
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
-------------
This current report on Form 10-Q contains forward-looking statements relating to
future expenses, capital expenditures, revenues, charges and earnings. These
statements may differ from actual future results due to, but not limited to, the
actual effects of the second quarter charges to earnings, the reduction in
capital expenditures and other actions described herein, changes in the local
and overall economy, the nature and pace of technological changes, the number
and effectiveness of competitors in the Company's markets, success in marketing
and selling expenditures and efforts, weather conditions, changes in legal and
regulatory policy and the mix of products and services offered in the Company's
target markets. Readers may wish to consider these important factors in
evaluating any statements contained herein. The following information is
unaudited and should be read in conjunction with the financial statements and
related footnotes included in this report.
The Company provides network access, local network, long distance, directory and
other communication services as well as public services including electric
transmission and distribution, natural gas transmission and distribution, water
distribution and wastewater treatment services to primarily rural and suburban
customers throughout the United States. The Company develops and expands its
businesses through internal investment, acquisitions and joint ventures in the
rapidly evolving telecommunications industry and in traditional public services
and related fields.
(a) Liquidity and Capital Resources
-------------------------------
For the six months ended June 30, 1997, the Company used cash flow from
operations and proceeds from net financings to fund capital expenditures and the
Company's stock buyback program. Funds requisitioned from Industrial Development
Revenue Bond construction fund trust accounts were used to partially pay for
construction of utility plant.
The Company considers its operating cash flows and its ability to raise debt and
equity capital as the principal indicators of its liquidity. Although working
capital is not considered to be an indicator of the Company's liquidity, the
Company experienced an increase in its working capital at June 30, 1997 as
compared to December 31, 1996. The Company has lines of credit with commercial
banks under which it may borrow up to $600 million. There were no amounts
outstanding under these lines at June 30, 1997.
During May, 1997, the Company arranged for the issuances of approximately $31
million of Industrial Development Revenue Bonds and Environmental Facility
Revenue Bonds with an initial interest rate of 4.15% and an ultimate maturity of
May 1, 2032. Proceeds from the issuances will be used to fund construction of
the Company's electric facilities and related equipment in Mohave and Navajo
Counties in Arizona and for wastewater collection and treatment facilities and
other pollution control purposes in the state of Illinois. In addition, Citizens
Utilities Company of California, a subsidiary of the Company, under a Department
of Water Resources Loan, was advanced approximately $1.5 million. Such funds
bear a fixed interest rate of 2.42% and a maturity date of July 1, 2027.
Proceeds from the issuance will be used to fund construction of treatment
facilities to meet the requirements of the State of California's Safe Drinking
Water Bond Law of 1988.
During the second quarter, the Company received increases in annual revenues
from regulatory commissions in Arizona and California totaling $1.2 million.
7
<PAGE>
PART I. FINANCIAL INFORMATION (Continued)
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
The Company has been pursuing an aggressive growth strategy to take advantage of
opportunities in the emerging communications marketplace and to become a full
service communications provider to an expanded base of customers. This strategy
included the initiation and expansion of long distance service which, in
combination with other enhanced service offerings, would enable the Company to
offer customers an integrated package of products and services. This strategy
also included expansion activities of the Company's competitive local exchange
subsidiary, Electric Lightwave, Inc. ("ELI") and continued expansion activities
for its local exchange carrier business. Late in 1996, the Company began the
transition of its long distance network primarily to fixed cost leases in order
to achieve the lowest cost of providing long distance service in anticipation of
its long distance service customer base expanding. The Company's customer base
expansion plan was focused on its local exchange franchised service territories,
markets adjacent to these local exchange franchised service territories and
customers of affiliated companies. In addition, the Company implemented a brand
recognition program and established a supporting sales and marketing
organization to increase the Company's communications market share. The increase
in revenues resulting from this communications expansion strategy, though
significant, was less than planned, especially for its long distance service
operations. As a result, the Company's long distance service operations
generated higher than expected first and second quarter 1997 losses which had an
adverse impact on Company earnings and cash flow.
In light of this continuing impact on earnings and cash flow, management
re-evaluated its communications growth strategy. It was decided that the Company
would concentrate its communications expansion efforts on the further
development and growth of ELI and its local exchange carrier business and
curtail expansion of the Company's long distance service operations in adjacent
markets. These decisions are expected to provide operating expense savings in
the future; and in addition, the Company has reduced its 1997 capital
expenditure program overall by $175 million. Expected operating expense savings
will come from reductions in workforce and benefits, consolidation of call
center operations, closure of sales offices, reduction of sales and marketing
activities and reconfiguration of the Company's network cost structure from
fixed to variable through new carrier contracts and network redesign. The
Company's 1997 capital expenditure program has been reduced as follows:
<TABLE>
<CAPTION>
1997 1997 1997
Original Revised Budget
Sector Budget Budget Reduction
------ ----------- ----------- ---------
($ in thousands)
<S> <C> <C> <C>
Communications $463,000 $322,000 $141,000
Public Services:
Natural gas 43,000 37,000 6,000
Electric 25,000 22,000 3,000
Water and wastewater 36,000 27,000 9,000
General 46,000 30,000 16,000
--------- ----------- ---------
$613,000 $438,000 $175,000
======== ======== ========
</TABLE>
The Communications sector capital expenditure budget was reduced by $141 million
primarily resulting from a reconsideration of expenditure levels due to recent
Federal Communications Commission ("FCC") orders. The Public Services sector
capital expenditure budget was reduced by $18 million to better match the timing
of expenditures with expected regulatory relief. The general capital expenditure
budget was reduced by $16 million primarily due to the elimination of the cost
of a corporate aircraft which was to support the Company's communications
expansion strategy, particularly its long distance service expansion to adjacent
markets.
In connection with the re-evaluation of the Company's communications growth
strategy, the Company recorded $34.6 million of charges to earnings in the
second quarter relating to the curtailment of certain long distance service
operations. These charges include expenses and costs associated with the
Communications sector workforce reductions, the curtailment of sales and
marketing initiatives and the termination of fixed cost network leases
associated with the reconfiguration of the Company's network cost structure from
fixed to variable, as well as, an additional reserve for uncollectible accounts
receivable.
8
<PAGE>
PART I. FINANCIAL INFORMATION (Continued)
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
After reviewing its employee benefit plans to determine if such plans were
competitive with those provided in the industry, the Company decided to curtail
certain of its employee benefit plans. This decision required a reassessment of
the recoverability of certain related regulatory assets that were expected to be
recovered in rates in the Company's current regulatory environment. The
curtailment decision and assessment of recoverability required the Company to
record a second quarter charge to earnings of approximately $36.9 million.
Additionally, between 1993 and 1996, the Company completed acquisitions of over
620,000 telephone access lines from GTE Corp. ("GTE") and ALLTEL Corporation
("ALLTEL"). In connection with these acquisitions, the Company entered into
transition services agreements with both GTE and ALLTEL to provide for customer
care and billing services. These agreements resulted in the Company using
numerous additional customer care and billing systems to serve its twelve-state
telecommunications operation. In order to realize economies of scale and improve
customer service, the Company, in 1994, decided to consolidate these customer
care and billing systems. Through a strategic partnership, the Company, in 1995,
began developing software and building new customer care and billing systems
that would be used for all of the Company's local exchange telephone properties.
As of June 30, 1997, the Company's Tennessee and New York local exchange
telephone properties were using these customer care and billing systems. After
reviewing the costs to develop this software and build these systems and the
incremental billing and customer care requirements placed on local exchange
companies by the Telecommunications Act of 1996 and subsequent FCC orders, the
Company determined that it was not probable that all of the costs would be
recoverable in the Company's rates. As a result, the Company recorded a $63.8
million charge to second quarter earnings.
During the second quarter 1997, the public utility commissions in the states of
Vermont, New York and Arizona issued orders which required the Company to record
$45 million of charges to earnings. These orders affected the Company's
electric, communications and water properties. More specifically, the Vermont
order required refunds to customers and deemed certain regulatory assets no
longer recoverable. The New York order required the Company to record an expense
and liability for amounts paid by ratepayers to GTE to fund postretirement
benefits prior to Citizens' acquisition of its New York local exchange
properties from GTE. The Arizona order disallowed recovery of certain property,
plant and equipment.
New Accounting Pronouncement:
- ----------------------------
In February, 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 128 ("SFAS 128"), "Earnings Per Share," which
is effective for periods ending after December 15, 1997. SFAS 128 supersedes APB
Opinion No.15, "Earnings Per Share" and establishes new standards for computing
and presenting earnings per share ("EPS"). The effect of SFAS 128 on the
Company's EPS has not been calculated, however, it is expected that the new
standards under SFAS 128 will not have a material effect.
9
<PAGE>
PART I. FINANCIAL INFORMATION (Continued)
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
(b) Results of Operations
---------------------
Revenues
- --------
Operating revenues for the three months ended June 30, 1997 decreased $12
million, or 4%, primarily due to decreased communications, natural gas and
electric revenues. Operating revenues for the six months ended June 30, 1997
increased $31.4 million, or 5%, primarily due to increased communications,
natural gas and water and wastewater revenues.
Communications revenues
- -----------------------
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30, ended June 30,
------------------------------------------ ---------------------------------------------
($ in thousands) ($ in thousands)
Increase/ Increase/
1997 1996 (Decrease) 1997 1996 (Decrease)
---------- ---------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Network access services $ 102,069 $ 107,044 (5%) $ 207,875 $ 207,389 0%
Local network services 62,705 59,790 5% 123,580 115,338 7%
Long distance services 10,883 11,144 (2%) 36,160 18,828 92%
Directory services 8,066 7,693 5% 15,568 14,809 5%
Other 15,682 15,578 1% 26,087 26,637 (2%)
---------- ---------- ------------- ------------ ----------- -------------
Total $ 199,405 $ 201,249 (1%) $ 409,270 $ 383,001 7%
========== ========== ============= ============ =========== =============
</TABLE>
Network access services revenues for the second quarter decreased $5 million, or
5%,and were flat for the six months ended June 30, 1997 as compared with the
prior year primarily due to a shift from network access revenues to long
distance service revenues resulting from a reduction in network access revenues
received from other long distance service companies as the Company captures
in-territory long distance service market share and revenues from these other
long distance service companies, partially offset by increased revenue as a
result of the acquisition of Conference-Call USA ("Conference-Call") in
December, 1996.
Local network services revenues for the second quarter increased $2.9 million,
or 5%, as compared with the prior year primarily due to internal access line
growth and the acquisition of Conference-Call. Local network services revenues
for the six months ended June 30, 1997 increased $8.2 million, or 7%, as
compared with the prior year primarily due to the acquisitions of Citizens
Telecommunications Company of Nevada ("Nevada") in March, 1996 and
Conference-Call and internal access line growth.
Long distance services revenues for the second quarter decreased $.3 million, or
2%, as compared with the prior year primarily due to the curtailment of long
distance service operations in adjacent markets and a second quarter charge of
approximately $14.2 million to provide an additional reserve for uncollectible
accounts receivable due to the curtailment of long distance service operations
in adjacent markets, partially offset by growth in customers and minutes
of use. Long distance services revenues for the six months ended June 30,
1997 increased $17.3 million, or 92%, as compared with the prior year
primarily due to growth in customers and minutes of use, partially offset by the
curtailment of long distance service operations in adjacent markets and a second
quarter charge to provide an additional reserve for uncollectible accounts
receivable due to the curtailment of long distance operations in adjacent
markets.
10
<PAGE>
PART I. FINANCIAL INFORMATION (Continued)
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
Public services revenues
- ------------------------
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30, ended June 30,
---------------------------------------- ------------------------------------------
($ in thousands) ($ in thousands)
Increase/ Increase/
Natural gas revenues 1997 1996 (Decrease) 1997 1996 (Decrease)
--------- --------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Residential $ 23,829 $ 25,484 (6%) $ 84,225 $ 76,900 10%
Commercial 9,704 10,072 (4%) 30,767 27,751 11%
Industrial 6,008 9,669 (38%) 14,298 20,045 (29%)
Municipal 660 440 50% 2,044 1,469 39%
--------- --------- ------------- ----------- ----------- -----------
Total distribution 40,201 45,665 (12%) 131,334 126,165 4%
Transportation 302 305 (1%) 1,382 1,298 6%
Other 2,211 2,306 (4%) 4,781 4,596 4%
--------- --------- ------------- ----------- ----------- -----------
Total $ 42,714 $ 48,276 (12%) $ 137,497 $ 132,059 4%
========= ========= ============= =========== =========== ===========
</TABLE>
Residential and commercial distribution revenues for the second quarter
decreased $1.7 million, or 6%, and $.4 million, or 4%, respectively, as compared
with the prior year primarily due to lower consumption and lower gas prices in
Louisiana, partially offset by rate increases granted in Louisiana and Arizona
in May, 1996 and November, 1996, respectively. Residential and commercial
distribution revenues for the six months ended June 30, 1997 increased $7.3
million, or 10%, and $3 million, or 11%, respectively, as compared with the
prior year primarily due to the rate increases granted in Louisiana and Arizona
and higher consumption due to cooler weather conditions in 1997 in Arizona.
Industrial distribution revenues for the second quarter decreased $3.7 million,
or 38%, as compared with the prior year primarily due to lower consumption and
lower gas prices. Industrial distribution revenues for the six months ended June
30, 1997 decreased $5.7 million, or 29%, as compared to the prior year primarily
due to lower consumption, partially offset by the rate increases granted in
Louisiana and Arizona.
Municipal distribution revenues for the second quarter and the six months ended
June 30, 1997, increased $.2 million, or 50%, and $.6 million, or 39%,
respectively, as compared with the prior year periods primarily due to the rate
increases granted in Louisiana and Arizona.
11
<PAGE>
PART I. FINANCIAL INFORMATION (Continued)
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30, ended June 30,
--------------------------------------- -----------------------------------------
($ in thousands) ($ in thousands)
Increase/ Increase/
Electric revenues 1997 1996 (Decrease) 1997 1996 (Decrease)
- -----------------
--------- --------- ------------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Residential $ 15,856 $ 17,876 (11%) $ 36,510 $ 36,551 0%
Commercial 12,618 13,539 (7%) 26,055 26,137 0%
Industrial 9,438 10,884 (13%) 20,286 21,093 (4%)
Municipal 1,775 2,107 (16%) 3,741 3,928 (5%)
--------- --------- ------------ ---------- -------- -------------
Total distribution 39,687 44,406 (11%) 86,592 87,709 (1%)
Transportation 766 659 16% 1,311 1,285 2%
Other 1,477 1,875 (21%) 1,929 1,823 6%
--------- --------- ------------ ---------- -------- -------------
Total $ 41,930 $ 46,940 (11%) $ 89,832 $ 90,817 (1%)
========= ========= ============ ========== ======== =============
</TABLE>
Residential and commercial distribution revenues for the second quarter
decreased $2 million, or 11%, and $.9 million, or 7%, respectively, as compared
with the prior year primarily due to a second quarter charge to reflect a
Vermont public utility commission order requiring refunds to customers of
approximately $5 million, partially offset by a rate increase granted in Hawaii
in August, 1996 and increased customers and consumption per customer in Arizona.
Industrial distribution revenues for the second quarter and six months ended
June 30, 1997 decreased $1.4 million, or 13%, and $.8 million, or 4%,
respectively, as compared with prior year periods primarily due to a second
quarter charge to reflect a Vermont public utility commission order requiring
refunds to customers of approximately $1.3 million.
Municipal distribution revenues for the second quarter and six months ended June
30, 1997 decreased $.3 million, or 16%, and $.2 million, or 5%, respectively, as
compared with the prior year periods, primarily due to a second quarter charge
to reflect a Vermont public utility commission order requiring refunds to
customers of approximately $.3 million.
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30, ended June 30,
--------------------------------------- -----------------------------------------
($ in thousands) ($ in thousands)
Increase/ Increase/
Water and wastewater revenues 1997 1996 (Decrease) 1997 1996 (Decrease)
- -----------------------------
-------- ---------- ------------ ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Residential distribution $ 17,623 $ 17,827 (1%) $ 33,861 $ 33,777 0%
Commercial distribution 3,379 3,192 6% 6,098 5,995 2%
Industrial distribution 224 218 3% 433 335 29%
Other 866 426 103% 1,642 1,281 28%
-------- ---------- ------------ ----------- ---------- ------------
Total $ 22,092 $ 21,663 2% $ 42,034 $ 41,388 2%
======== ========== ============ =========== ========== ============
</TABLE>
Water and wastewater revenues for the second quarter and six months ended June
30, 1997 are comparable with prior year periods.
12
<PAGE>
PART I. FINANCIAL INFORMATION (Continued)
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
Expenses
- --------
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30, ended June 30,
------------------------------------------ ------------------------------------------
($ in thousands) ($ in thousands)
Increase/ Increase/
1997 1996 (Decrease) 1997 1996 (Decrease)
---------- ---------- ------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Natural gas purchased $ 19,610 $ 26,911 (27%) $ 78,179 $ 75,112 4%
Depreciation 58,013 47,200 23% 114,579 94,229 22%
Network expenses 39,232 14,360 173% 68,326 22,139 209%
Taxes other than income 23,603 20,625 14% 47,915 42,706 12%
Electric energy and
fuel oil purchased 22,980 23,707 (3%) 45,170 43,867 3%
Sales and marketing 25,190 12,212 106% 39,324 17,548 124%
Other operating expenses 275,634 99,030 178% 381,180 206,590 85%
---------- ---------- ------------- ---------- ---------- ------------
Total $ 464,262 $ 244,045 90% $ 774,673 $ 502,191 54%
========== ========== ============= ========== ========== ============
</TABLE>
Natural gas purchased for the second quarter decreased $7.3 million, or 27%, as
compared with the prior year primarily due to lower prices and lower consumption
in Louisiana, partially offset by higher prices and higher consumption in
Arizona.
Depreciation expense for the second quarter and the six months ended June 30,
1997 increased $10.8 million, or 23%, and $20.4 million, or 22%, respectively,
as compared with the prior year periods primarily due to increased property,
plant and equipment.
Network expenses for the second quarter and six months ended June 30, 1997
increased $24.9 million, or 173%, and $46.2 million, or 209%, respectively, as
compared with the prior year periods primarily due to higher long distance
network access costs and a second quarter charge of approximately $11.1 million
related to fixed cost lease terminations as a result of the curtailment of
certain long distance service operations.
Taxes other than income for the second quarter and the six months ended June 30,
1997 increased $3 million, or 14%, and $5.2 million, or 12%, respectively, as
compared with the prior year periods primarily due to increased payroll,
property and franchise taxes as a result of the acquisitions of Nevada in March,
1996 and Conference-Call in December, 1996.
Sales and marketing expenses for the second quarter and six months ended June
30, 1997 increased $13 million, or 106%, and $21.8 million, or 124%,
respectively, as compared with the prior year periods primarily due to the
Citizens Communications' branding initiative and a second quarter charge of
approximately $8.6 million as a result of the curtailment of certain long
distance service operations.
Other operating expenses for the second quarter and six months ended June 30,
1997, increased $176.6 million, or 178%, and $174.6 million, or 85%,
respectively, as compared with the prior year periods primarily due to second
quarter charges of approximately $150.6 million, which includes approximately
$.7 million related to the curtailment of certain long distance service
operations, approximately $36.9 million related to benefit plan curtailments and
related regulatory assets, approximately $63.8 million related to
telecommunications information systems and software, approximately $32.2 million
related to regulatory commission orders in New York, Vermont and Arizona and
approximately $17 million related to other.
13
<PAGE>
PART I. FINANCIAL INFORMATION (Continued)
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
Other income, net/Interest expense/Income taxes
- -----------------------------------------------
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30, ended June 30,
--------------------------------------- ------------------------------------------
($ in thousands) ($ in thousands)
Increase/ Increase/
1997 1996 (Decrease) 1997 1996 (Decrease)
---------- --------- ----------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income $ 8,569 $ 13,853 (38%) $ 18,284 $ 22,482 (19%)
Other (1,728) 3,923 (144%) 841 6,341 (87%)
---------- --------- ----------- ---------- --------- ------------
Total $ 6,841 $ 17,776 (62%) $ 19,125 $ 28,823 (34%)
========== ========= =========== ========== ========= ============
</TABLE>
Investment income for the second quarter and six months ended June 30, 1997
decreased $5.3 million, or 38%, and $4.2 million, or 19%, respectively, as
compared with the prior year periods primarily due to income earned in 1996 for
financial support provided to Hungarian Telephone and Cable Corporation.
Other income for the second quarter and six months ended June 30, 1997 decreased
$5.7 million, or 144%, and $5.5 million, or 87%, respectively, as compared with
the prior year periods primarily due to a second quarter charge of approximately
$4.5 million related to an Arizona public utility commission order disallowing
recovery of certain amounts of the equity component of the Allowance for Funds
Used During Construction ("AFUDC").
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30, ended June 30,
----------------------------------------- ------------------------------------------
($ in thousands) ($ in thousands)
Increase/ Increase/
1997 1996 (Decrease) 1997 1996 (Decrease)
--------- ---------- ------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Interest expense $ 28,694 $ 22,645 27% $ 55,710 $ 44,647 25%
</TABLE>
Interest expense for the second quarter and six months ended June 30, 1997
increased $6.0 million, or 27%, and $11.1 million, or 25%, respectively, as
compared with the prior year periods primarily due to the issuance of debentures
in June and December, 1996 and a second quarter charge of approximately $1.7
million related to an Arizona public utility commission order disallowing
recovery of certain amounts of the interest component of AFUDC.
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30, ended June 30,
--------------------------------------------- ----------------------------------------
($ in thousands) ($ in thousands)
Increase/ Increase/
1997 1996 (Decrease) 1997 1996 (Decrease)
------------ ------------- ------------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Income taxes $ (57,949) $ 21,584 (368%) $ (42,322) $ 41,511 (202%)
</TABLE>
Income taxes for the second quarter and six months ended June 30, 1997 decreased
$79.5 million, or 368%, and $83.8 million, or 202%, respectively, as compared
with the prior year periods primarily due to the tax benefit associated with the
second quarter charges to earnings. The effective annual tax rate (benefit) for
each period is approximately 32%.
14
<PAGE>
PART I. FINANCIAL INFORMATION (Continued)
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
Net income/Earnings per share
- -----------------------------
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30, ended June 30,
-------------------------------------------- ------------------------------------------
($ in thousands) ($ in thousands)
Increase/ Increase/
1997 1996 (Decrease) 1997 1996 (Decrease)
------------- ---------- ------------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) $ (123,577) $ 46,251 (367%) $ (93,407) $ 85,107 (210%)
Earnings (loss) per share $ (.51) $ .19 (368%) $ (.39) $ .35 (211%)
</TABLE>
Net income for the second quarter and six months ended June 30, 1997 decreased
$169.8 million, or 367%, and $178.5 million, or 210%, respectively, as compared
with the prior year periods primarily due to approximately $197.3 million of
pre-tax charges recorded in the second quarter of 1997. Absent such charges, net
income for the second quarter and six months ended June 30, 1997 would have
decreased $34.7 million, or 75% , and $43.4 million, or 51%, respectively, as
compared with the prior year periods primarily related to increased network,
sales and marketing and other operating expenses related to the Company's
expansion of its communications activities.
Earnings per share for the second quarter and six months ended June 30, 1997
decreased $.70, or 368%, and $.74, or 211%, respectively, as compared with the
prior year periods primarily due to the approximately $197.3 million of pre-tax
second quarter charges, partially offset by a decrease in shares outstanding
resulting from the Company's stock buyback program. Absent such charges,
earnings per share would have decreased $.14, or 74%, and $.18, or 51%, for the
second quarter and six months ended June 30, 1997, respectively, as compared
with the prior year periods primarily due to increased network, sales and
marketing and operating expenses related to the Company's expansion of its
communications activities.
15
<PAGE>
PART II. OTHER INFORMATION
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
Item 1. Legal Proceedings
-----------------
In November 1995, the Company's Vermont electric division was permitted an 8.5%
rate increase. Subsequently, the Vermont Public Service Board (the "Board")
called into question the level of rates awarded the Company in connection with
its formal review of allegations made by the Department of Public Service (the
"DPS"), the consumer advocate in Vermont and a former Citizens employee. The
major issues in this proceeding involved classification of certain costs to
property, plant and equipment accounts and the Company's Demand Side Management
("DSM") program. In addition, the DPS believed that the Company should have
sought and received regulatory approvals prior to construction of certain
facilities in prior years. On June 16, 1997, the Board ordered the Company to
reduce its rates for Vermont electric service by 14.65% retroactive to November
1, 1995 and to refund to customers, with interest, all amounts collected since
that time in excess of the rates authorized by the Board. The Company estimates
that the future annual effect of the rate reduction ordered by the Board is
approximately $3.9 million and that its refund obligation is approximately $6.6
million. The Company plans to make the refund to its customers, by September,
1997, by issuing a credit to the utility bills of each customer. In addition,
the Board assessed statutory penalties totaling $60,000 and placed the Company
on regulatory probation for a period of at least five (5) years. The Company has
filed a motion for clarification and reconsideration with the Board.
In January 1997, the Company's Illinois subsidiary was served with a complaint
in an action commenced by the Illinois Attorney General (the "State"). The
complaint alleges violations of National Pollution Discharge Elimination System
permits issued to three wastewater treatment plants, acquired in mid-1994
through a merger with Metro Utility Company ("Metro"), as well as related
allegations. The majority of the alleged violations predate the Company's
acquisition of the plants, one of which has been taken out of service to foster
regionalization. The Company filed its answer denying the allegations of the
complaint and raised the affirmative defense of failure of the State to comply
with certain provisions of the Illinois Environmental Protection Act. The
Company has completed settlement negotiations with the State and believes that a
settlement will be executed in the near future. The cost of the settlement is
expected to be less than $70,000. The Company has contractual rights of
indemnification from the former shareholders of Metro and expects to recover any
settlement cost in full.
On June 30, 1997, Electric Lightwave Inc. ("ELI"), a subsidiary of the Company,
filed a lawsuit in the U.S. District Court in Seattle, Washington, against US
West Communications, Inc. ("US West") alleging that US West is illegally
blocking local telephone service competition. The lawsuit charges US West with
violating federal and state antitrust laws, as well as various federal and state
regulatory statutes, by failing to provide adequate interconnection services and
facilities to enable ELI to provide quality services to its customers. ELI is
seeking an unspecified amount of damages to be determined by a jury. In
addition, ELI is seeking an injunction to prohibit US West from discriminating
against ELI and its customers when it provides interconnection facilities and
equipment.
16
<PAGE>
PART II. OTHER INFORMATION
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
(a) The Registrant held its 1997 Annual Meeting of the Stockholders on May 22,
1997.
(b) Proxies for the Annual Meeting were solicited pursuant to Regulation 14;
there was no solicitation in opposition to management's nominees for
directors as listed in the Proxy Statement and all such nominees were
elected.
The stockholders voted to elect all nominees as directors. Directors
elected along with their respective percentage of total outstanding shares
voted in the affirmative were: N.I. Botwinik(78%), A.I. Fleischman(79%),
J.C. Goodale(79%),S. Harfenist(79%), A.N. Heine (79%), E.A.Rickless (79%),
J.L.Schroeder(79%), R.D. Siff(79%), R.A. Stanger(79%), C.H. Symington, Jr.
(79%), E.Tornberg(79%), C. Tow (77%) and L. Tow (78%). Stockholders voted
only 5% of outstanding shares in the negative for one or more of the
nominees.
The stockholders voted 68% of total outstanding shares in the affirmative
for the approval of the Amendment to Non-Employee Directors' Deferred Fee
Equity Plan. Stockholders voted only 14% of the outstanding shares against
the approval of the plan.
The stockholders voted 73% of total outstanding shares in the affirmative
for the approval of the Amendment to the 1992 Employee Stock Purchase Plan.
Stockholders voted only 9% of the outstanding shares against the approval
of the plan.
The stockholders voted 74% of total outstanding shares in the affirmative
for the approval of the Amendment to the Citizens Utilities Company 1996
Equity Incentive Plan. Stockholders voted only 8% of the outstanding shares
against the approval of the plan.
Item 6. Exhibits and Reports on Form 8-K
---------------------------------
(a) The following exhibits are filed as part of this report:
Exhibit No. Description
10.6.2 Amendment dated May 22, 1997, to the Non-Employee Directors'
Deferred Fee Equity Plan.
10.18 Amendment dated May 22, 1997, to the 1992 Employee Stock
Purchase Plan.
10.21 Amendment dated May 22, 1997, to the 1996 Equity Incentive Plan.
(b) On May 1, 1997, the Company filed Form 8-K dated March 31, 1997, under Item
7, "Exhibits," announcing first quarter ended March 31, 1997 earnings and
earnings per share. On May 2, 1997, the Company filed on Form 8-K/A dated
March 31, 1997, under Item 7, "Exhibits," Chairman's Letter to Shareholders
regarding first quarter 1997 results. On July 11, 1997, the Company filed
on Form 8-K, dated the same date, under Item 5, "Other Events," and Item 7,
"Exhibits," announcing actions to be taken by the Company to improve
earnings and slow the pace of its telecommunications expansion; and that it
would be taking a second quarter charge to earnings.
17
<PAGE>
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: August 7, 1997 By: /s/ Livingston E. Ross
----------------------
Livingston E. Ross
Vice President and Controller
18
EXHIBIT 10.6.2
A - 1
AMENDMENT TO NON-EMPLOYEE
DIRECTORS' DEFERRED FEE EQUITY PLAN
The Non-Employee Directors' Deferred Fee Equity Plan is proposed to be
amended by the addition of the following Article 12:
ARTICLE 12 Formula Plan
12.1 Eligibility. All Directors of the Company shall automatically
participate in the Formula Plan.
12.2 Shares subject to the Formula Plan. Shares of Common Stock
which shall have been purchased or which may be issued upon
the exercise of the Options under the Formula Plan shall be
included as shares "which shall have been purchased by
Participants pursuant to Options and which may be issued
pursuant to outstanding Options under the Option Plan" for
purposes of the maximum share limitation of Section 11.2.
12.3 Terms, Conditions and Form of Options. Each Option granted
under the Formula Plan shall be evidenced by written agreement
in such form and containing such terms, consistent with the
Plan, as the Committee shall from time to time approve. All
Options and said agreements shall be subject to the terms and
conditions set forth in this Article 12 and to the other
applicable terms and conditions of the Plan.
12.4 Grant. On the first day of each Plan Year starting with the
calendar 1997 and continuing through 2002 (and for successive
years thereafter if the Plan is extended by the Board of
Directors), Options to purchase 5,000 shares of Common Stock,
as adjusted pursuant to Section 11.5, shall be awarded to each
Director in office on such date, without the need for further
corporate action. The Grant Date for such Options shall be the
first day of each year. In addition, on September 1, 1996,
Options to purchase 2,500 shares of Common Stock shall be
granted to each Director of the Company in office on such
date. In each Plan Year, the Board of Directors may change the
number of shares of Common Stock which will be subject to
purchase upon exercise of the Options to be awarded during the
succeeding Plan Year subject to a maximum of 10,000 shares of
Common Stock per year, as adjusted pursuant to Section 11.5.
12.5 Subsequently Elected Directors. For years subsequent to 1996,
individuals who are not Directors on the first day of a Plan
Year but who become Directors of the Company on or before the
date of the annual meeting of stockholders for the election of
directors shall be awarded, as of the Grant Date, without need
for further corporate action, Options to purchase 5,000 shares
of Common Stock. The Grant Date for such Options shall be the
date upon which such individual first becomes a Director.
Individuals who become a Director or who become eligible to
participate in the Plan during a Plan Year, but after the date
of the annual meeting of stockholders, shall not be eligible
to receive options until the first day of the next Plan Year.
12.6 Exercise Price. The purchase price per share of Common Stock
for which each Option is exercisable shall be 100% of the Fair
Market Value per share of Common Stock on the Grant Date for
such Option. "Fair Market Value" shall have the meaning as
defined in Article 2 assuming that the Grant Date is a date
specified in the definition.
12.7 Exercisability; Term of Options. Each Option under the Formula
Plan will vest and become exercisable six months after the
Grant Date (provided that the Participant is a Director at
that time) or on such earlier date that a Participant ceases
to be a Director by reason of retirement (which for these
purposes shall mean retirement pursuant to Board policy),
death or disability. Except as otherwise provided in this
Section, each Option granted under the Formula Plan shall
remain exercisable until the 10th anniversary of its Grant
Date.
12.8 Other. To the extent not inconsistent with the provisions set
forth in this Article 12, Options awarded pursuant to the
Formula Plan, Participant's rights and the Company's
obligations shall be subject to the provisions of Sections
4.5, 4.6, 4.7 and 4.8 and Articles 2, 9, 10 and 11 of the
Plan.
12.9 Compliance with law. All Options granted pursuant to the
Formula Plan will be subject to compliance with all applicable
laws, rules and regulations of any regulatory or other
governmental body having jurisdiction, and with any rules or
policies of any stock exchange on which shares of Common Stock
may be listed, and each option agreement shall provide that
the validity of the Options and the Company's obligation to
issue Shares of Common Stock upon exercise of the Option are
subject to such compliance.
12.10 Duration of the Formula Plan; Effective Date. Amendment No. I
to the Plan shall become effective on August 20, 1996,
provided that the effectiveness of the Formula Plan and the
amendment to the Plan modifying Section 4.7 shall be subject
to approval of the stockholders of the Company at the first
annual meeting of the stockholders held after the end of the
1996 to the extent, in each case, that such approval is called
for by the rules or policies of the New York Stock Exchange or
is otherwise deemed advisable by the Company. The period
during which Option awards may be made under the Formula Plan
shall terminate on December 31, 2002. Such termination shall
not effect the terms of any then outstanding Options. The
Board of Directors of the Company shall have the right to
extend the effectiveness of the Formula Plan, with such
amendments to the Plan as they may deem appropriate, for an
additional six-year period until December 31, 2008 without any
additional approval by the stockholders of the Company being
required, it being understood that if any approval of
stockholders of the Company is obtained during 1997, such
approval shall include the Plan as and if so extended by the
Board of Directors.
Certain provisions of the Plan which are referred to in proposed Article 12 read
as follows:
"2.10 "Director" means any director of the Company who is not a
full-time employee of the Company. For the purposes of the Plan, an individual
who is both a full-time employee of the Company and a director of the Company
and therefore ineligible to participate in the Plan and who ceases to be a
full-time employee but remains in office as a director shall become eligible to
participate in the Plan as a Director as of the termination of his or her
service as a full-time employee."
"2.13 "Fair Market Value" of the Common Stock as of any...Effective
Date...shall be the average of the daily high and low prices of shares of Common
Stock reported on a composite tape for securities listed on The New York Stock
Exchange or, if such shares are not listed for trading on such exchange, on any
other established securities market for which quotations are readily available,
for the third, fourth, fifth and sixth trading days of the month which follow
each ... Effective Date . . . Participants will be credited with fractional
share interests. If required, an appropriate adjustment will be made for record
dates, payment dates and ex-distribution trading. The ... Option Plan Committee
or the Board of Directors may select in advance different trading days of the
month for determining Fair Market Value, in their discretion."
11.2 Shares Subject to the Plan.
As of any date the maximum number of shares of Common Stock which the
Plan may be obligated to deliver pursuant to the Stock Plan and the maximum
number of shares of Common Stock which shall have been purchased by Participants
pursuant to Options and which may be issued pursuant to outstanding Options
under the Option Plan shall not be more than one (1%) percent of the total
outstanding shares of Common Stock Series A and Series B of the Company as of
such date, subject to adjustment in the event of changes in the corporate
structure of the Company affecting capital stock. Any Common Stock transferred
by the Company to a Stock Plan Account or to the Trustee or delivered by the
Company upon exercise of an Option hereunder may consist, in whole or in part,
of authorized and unissued shares or treasury shares as the Company shall
determine. Cash transferred to the Trustee may be used to purchase Common Stock
in the open market or from the Company.
In the event that the total number of shares of Common Stock subject
to, or issued pursuant to, the Plan at any one time is in excess of the
above-stated limit, the number need not be reduced if such excess has resulted
from a reduction in the amount of issued and outstanding shares of Common Stock
subsequent to the time that such Options were granted or such shares were
issued. If any shares of Common Stock subject to purchase by a Participant under
an Option under the Plan are not purchased, such shares of Stock shall be deemed
not to have been purchased pursuant to the Plan for purposes of this Section.
Shares of Common Stock received or retained by the Company in payment of the
exercise price of Options or in payment, or in lieu of payment, of withholding
taxes shall not reduce the number of shares deemed to have been purchased
pursuant to the Plan."
"11.5 Adjustments in Event of Change in Common Stock".
Subject to the provisions of Sections 6.1 and 7.3, in the event of any
stock dividend, stock split, recapitalization, or reclassification of shares of
Common Stock, merger or consolidation of the Company or sale by the Company of
all or a portion of its assets, or tender offer for its securities, or other
event which could distort the implementation of the Plan or the realization of
its objectives, the Administrator shall make such appropriate adjustments in the
number and kind of securities which a Plan Unit will represent or which may be
paid out under the Plan, and in the number of shares of Common Stock or other
securities or number and kind of securities, and the purchase price therefor,
for which an Option may be exercisable or in terms, conditions or restrictions
on securities as the Administrator deems equitable.
In the event of a stock split or stock dividend, the number of shares
purchasable upon exercise of an Option shall be increased to the new number of
shares which result from the shares covered by the Option immediately before the
split or dividend. The purchase price per share shall be reduced proportionately
and the total purchase price will remain the same. In the case of a distribution
in property other than cash the number of shares covered shall be increased to
reflect, in shares valued at the then current market, the fair value of the
distribution.
All events occurring between the Effective Date of the Option and its
exercise shall result in an adjustment to the Option terms."
The following provisions of the Plan referred to in proposed Article 12
are omitted herein. They are contained in the Plan, a copy of which can be
obtained from the Company as described in the Proxy Statement:
Section 4.5 dealing with notice of exercise; Section 4.6 covering the
payment of the Purchase Price for an Option either in cash or in shares of
Common Stock; Section 4.7 covering the exercisability of an Option upon
termination of a Participant's directorship; Section 4.8 covering the
non-transferability of an Option and the exceptions thereto; Article 9 covering
Option exercise matters; Article 10 covering administrative matters; and Article
11 covering term of the Plan, the non-alienation of benefits under the Plan, and
amendments of the Plan.
EXHIBIT 10.18
CITIZENS UTILITIES COMPANY
1992 Employee Stock
Purchase Plan
<PAGE>
CITIZENS UTILITIES COMPANY
1992 Employee Stock Purchase Plan
As Amended May 22, 1997
-----------------------
1. Purpose
The purpose of the 1992 Employee Stock Purchase Plan (the "Plan") is to
enable eligible employees of Citizens Utilities Company (the "Company") to
acquire Proprietary interests in the Company through the ownership of common
stock of the Company. The Company believes that employees who participate in the
Plan will have a closer identification with the Company by virtue of their
ability as stockholders to participate in the Company's growth and earnings. It
is the intention of the Company to have the Plan qualify as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code of 1986 (the
"Code"). Accordingly, the provisions of the Plan shall be construed so as to
extend and limit participation in a manner consistent with the requirements of
that section of the Code.
2. Definitions
The following terms have the following meanings:
(a) "Common Stock" shall mean shares of the $.25 par value
Series B common stock of the Company.
(b) "Subsidiary" shall mean any present or future corporation
which is or would be a "subsidiary corporation" of the Company
as the term is defined in Section 424 of the Code.
(c) "Eligible Employee" shall mean a person regularly employed by
the Company or a Subsidiary on the effective date of any
offering of stock pursuant to the Plan; provided, however,
that no person shall be considered an Eligible Employee unless
that person is customarily employed by the Company or a
Subsidiary for more than twenty hours per week and more than
five months in a calendar year, and provided further, that the
Board of Directors may exclude the employees of any specified
Subsidiary from any offering under the Plan.
(d) "Purchase Period" shall mean the period set by the Committee
for each offering commencing on the date on which options are
granted pursuant to such offering to participating Eligible
Employees and ending on the last date on which installment
payments for stock to be purchased under the Plan for such
offering may be made.
(e) "Option" shall mean the right granted to Eligible Employees to
purchase the Company's Common Stock under an offering made
under the Plan.
<PAGE>
(f) "Subscription Period" shall mean that period of time
prescribed in any offer of stock under the Plan beginning on
the first day employees may elect to purchase shares and
ending on the last day such elections to purchase are
authorized to be received and accepted.
(g) "Average Market Price" shall mean the mean between the high
and low prices for the Company's shares of Common Stock on the
New York Stock Exchange as reported by such exchange, or if
the Company's Common Stock is not traded on such exchanges,
the high and low prices for the Company's shares of Common
Stock in the over-the-counter market, as reported by the
National Association of Securities Dealers Automated Quotation
System (NASDAQ) or other quotation service.
(h) "Annual Pay" shall mean an amount equal to the annual basic
rate of pay of an Eligible Employee as determined from the
payroll records of the Company or a Subsidiary on the
effective date of an offer of stock made pursuant to the Plan.
3. Shares Reserved For The Plan
The shares of the Company's Common Stock to be sold to Eligible
Employees under the Plan may, at the election of the Company, be either treasury
shares or shares originally issued for such purpose. The maximum number of
shares of Common Stock which shall be reserved and made available for sale under
the Plan shall be 6,000,000. The shares reserved may be issued and sold
pursuant to one or more offerings under the Plan. With respect to each offering,
the Committee referred to in Paragraph 4 will specify the number of shares to be
made available, the length of the Subscription Period, the length of the
Purchase Period and such other terms and conditions not inconsistent with the
Plan as may be appropriate. In no event shall the Subscription Period and the
Purchase Period together exceed 27 months for any offering.
In the event of a subdivision or combination of the Company's shares,
including a stock dividend, stock split or similar event, the maximum number of
shares which may thereafter be issued and sold under the Plan and the number of
shares under elections to purchase at the time of such subdivision or
combination will be proportionately increased or decreased, the terms relating
to the price at which shares under elections to purchase will be sold will be
appropriately adjusted, and such other action will be taken as in the opinion of
the Board of Directors is appropriate under the circumstances. In case of a
reclassification or other change in the Company's shares, the Board of Directors
also will make appropriate adjustments.
4. Administration Of The Plan
The Plan shall be administered by a Committee consisting of not less
than three directors of the Company who shall be appointed by the Board of
Directors. Each Committee member shall be a "disinterested person" as such term
is defined in Rule 16b-3 of the rules of the Securities and Exchange Commission.
The Committee shall be vested with full authority to make, administer and
interpret such rules and regulations regarding the Plan or to make amendments to
the Plan itself as it may deem advisable; provided, however, that no such
amendment shall increase the maximum number of shares available for sale under
the Plan, otherwise than as required to reflect a subdivision or a combination
as provided in Paragraph 3 hereof, nor shall any such amendment act to expand
the persons eligible to participate in the Plan beyond the employees of the
Company and its Subsidiaries. Any determination, decision, or action of the
Committee in connection with the construction, interpretation, administration,
or application of the Plan shall be binding upon all Eligible Employees and all
persons claiming under an Eligible Employee.
5. Participation In The Plan
Options to purchase the Company's Common Stock under the Plan shall be
granted only to Eligible Employees. Options to purchase shares shall be granted
to all Eligible Employees of the Company or any of its subsidiaries whose
Eligible Employees are granted such rights; provided, however, that the
Committee may determine that any offering of Common Stock under the Plan will
not be extended to directors, officers, or highly paid employees of the Company
or its Subsidiaries as defined in Code Section 414(g) or to those employees
whose principal duties consist of supervising the work of other employees, and
provided further that in no event may an employee be granted an option under
this Plan if such employee, immediately after the option is granted, owns stock
possessing 5% or more of the total combined voting power or value of all classes
of capital stock of the Company or of its Subsidiaries. For the purpose of
determining stock ownership under this paragraph, the rules of Section 424(d) of
the Code shall apply and stock which the employee may purchase under all
outstanding options shall be treated as stock owned by the employee.
6. Purchase Price
The purchase price for shares of Common Stock purchased pursuant to the
Plan (except as otherwise provided herein) will be the lesser of 85% of the
Average Market Price on the first day of the Purchase Period or 85% of the
Average Market Price on the last day of the Purchase Period. If no shares were
traded on either or both of those days, the purchase price shall be established
based upon 85% of the Average Market Price on the last day prior thereto on
which shares were traded.
7. Method Of Payment
Payment for shares purchased pursuant to the Plan shall be made in
installments through payroll deductions, with no right of prepayment except as
provided in Paragraph 15 and 16 hereof. Each Eligible Employee electing to
purchase shares will authorize the Company to withhold a designated amount from
the Employee's regular weekly, biweekly, semimonthly or monthly pay for each
payroll period during the Purchase Period. All such payroll deductions made for
an Eligible Employee shall be credited to the Employee's account under the Plan.
At the end of the Purchase Period, each Eligible Employee shall receive in cash
the balance remaining in the Employee's account, if any, after the purchase of
the number of shares covered by the option to purchase shares.
8. Employee's Election To Purchase-Grant Of Options
In order to participate in the Plan, an Eligible Employee must sign an
election to purchase shares on a form provided by the Company, stating the
Eligible Employee's desire to purchase shares under the Plan and showing the
amount which the Eligible Employee elects to have withheld from the Employee's
pay for such payroll period during the Purchase Period designated by the
Committee. Before each new Purchase Period designated by the Committee, each
Eligible Employee shall have the right to either continue the payroll
withholding in effect from the previous Purchase Period or increase or decrease
such withholding, subject to the limitations of the Plan or such other
limitations set by the Committee for such offering. If an Eligible Employee
fails to make a new election within the period specified by the Committee for
such new offering, the Eligible Employee shall be deemed to have elected to
continue the same payroll withholding that he or she elected for the previous
Purchase Period. The election to purchase shares must be delivered on or before
the last day of the Subscription Period to the person or office designated to
receive and accept such elections. Subject to the limitations set forth in
Paragraph 9, each participating Eligible Employee shall be granted an option to
subscribe to purchase a number of shares to be determined by the following
procedure:
Step 1. Determine the aggregate amount which will be withheld from the
Eligible Employee's pay during the Purchase Period;
Step 2. Determine the amounts which represent the lower of 85% of Average Market
Price on the first day of the Purchase Period or the last day of the
Purchase Period;
Step 3. Divide the figure determined in Step 1 by the figure determined in Step
2 and round off the quotient to the nearest whole number. This final
figure shall be the fixed maximum number of shares for which the
Eligible Employee will be entitled to purchase.
The date on which the option is granted to each participating Eligible
Employee shall be the first day of the Purchase Period. Notice that an option
has been granted shall be given to each participating Eligible Employee and
shall show the withholding from such Eligible Employee's pay for each payroll
period during the Purchase Period.
In the event the total maximum number of shares resulting from all
elections to purchase under any offering of shares under the Plan exceeds the
number of shares offered, the Company reserves the right to reduce the maximum
number of shares which Eligible Employees may purchase pursuant to their
elections to purchase, to allot the shares available in such manner as it shall
determine, but generally pro rata to subscriptions received.
All shares included in any offering under the Plan in excess of the
total number of shares which all Eligible Employees elect to purchase and all
shares with respect to which elections to purchase are canceled as provided in
Paragraph 12 shall continue to be reserved for the Plan and shall be available
for inclusion in any subsequent offering under the Plan.
9. Limitations On Number Of Shares Which May Be Purchased
The following limitations shall apply with respect to the number of
shares which may be purchased by each Eligible Employee who elects to
participate in an offering under the Plan.
(a) No Eligible Employee may purchase shares during any one offering
pursuant to the Plan for an aggregate purchase price (which shall be
computed on an annual basis in the event the Purchase Period is more or
less than 12 months) in excess of 20% of the Employee's Annual Pay; and
(b) No Eligible Employee shall be granted an option to purchase shares
under the Plan if such option would violate the 5% limitation described
in the second provision contained in Section 5 hereof; and
(c) No Eligible Employee may be granted an option to purchase shares which
permits the Employee's rights to purchase stock under the Plan and all
other stock option plans of the Company and of any Subsidiary pursuant
to Section 423 of the Internal Revenue Code to accrue at a rate which
exceeds in any one calendar year $25,000 of the fair market value of
such stock (determined on the date the option to purchase is granted).
An Eligible Employee may elect to purchase less than the total number
of shares which he or she is entitled to elect to purchase.
10. Rights As Stockholder
An Eligible Employee will become a stockholder of the Company with
respect to shares for which payment has been completed at the close of business
on the last business day of the Purchase Period or on such earlier date on which
the Eligible Employee has completed payment of the purchase plan shares. An
Eligible Employee will have no rights as a stockholder with respect to shares
under an election to purchase shares until the Employee has become a stockholder
as provided above. A certificate for the shares purchased will be issued as soon
as practicable after an Eligible Employee becomes a stockholder.
11. Rights To Purchase Shares Not Transferable
All rights of an Eligible Employee under the Plan may be exercised only
by the Eligible Employee during his or her lifetime. An Eligible Employee's
rights under an election to purchase shares may not be sold, pledged, assigned
or transferred in any manner otherwise than by will or the laws of descent and
distribution. If this provision is violated the right of the Eligible Employee
to purchase shares shall terminate and the only right remaining under such
Eligible Employee's election to purchase will be to have paid over to the person
entitled thereto the amount then credited to the Eligible Employee's account.
12. Cancellation Of Election To Purchase
An Eligible Employee who has elected to purchase shares may cancel that
election in its entirety or may partially cancel that election by reducing the
amount which he or she has authorized the Company to withhold from his or her
pay for each payroll period during the Purchase Period. Any such full or partial
cancellation shall be effective upon the delivery by the Eligible Employee of
written notice of cancellation to the office or person designated to receive
elections. Such notice of cancellation must be so delivered before the close of
business on the last business day of the Purchase Period. If an Eligible
Employee partially cancels an original election by reducing the amount
authorized to be withheld from the Employee's pay, he or she shall continue to
make installment payments at the reduced rate for the remainder of the Purchase
Period. Only one partial cancellation may be made during a Purchase Period.
An Eligible Employee's rights upon the full or partial cancellation of
an election to purchase shares shall be limited to the following:
(a) The Employee may receive in cash, as soon as practicable after delivery
of the notice of cancellation, the amount then credited to the
Employee's account, except, in the case of a partial cancellation, the
Employee must retain in his or her account an amount equal to the
amount of the new payroll deduction times the number of payroll periods
in the Purchase Period through the date of cancellation, or
(b) The Employee may have the amount credited to the Employee's account at
the time the cancellation becomes effective applied to the purchase of
the number of shares such amount will then purchase.
If option (b) is elected, installment payments must be continued for
the month in which the notice of cancellation is given. The cancellation and
purchase of shares will become effective at the close of business on the last
day of business of such month. The purchase price of the shares so purchased
will be 85% of the Average Market Price on the first day of the Purchase Period.
The credit in an Employee's account shall be the aggregate of the amounts
withheld from the Employee's pay and any amounts paid pursuant to Paragraphs 13,
14, 15 and 16.
13. Leave Of Absence Or Layoff
An Eligible Employee purchasing stock under the Plan who is granted a
leave of absence (including a military leave) during the Purchase Period and
such absence is for a period of 90 days or less (or if for a period in excess of
90 days, the Employee's right of reemployment with the Company is guaranteed
either by statute or by contract) may during such period of absence make
payments in cash to the Company in amounts equal to what such payments would
have been pursuant to corresponding payroll deductions.
14. Effect Of Failure To Make Payments When Due
If in any payroll period, for any reason not set forth in Paragraph 13,
an Eligible Employee who has filed an election to purchase shares under the Plan
has no pay or the Employee's pay is insufficient (after other authorized
deductions) to permit deduction of the installment payment, such payment may be
made in cash at the time. If not so made, the Eligible Employee, when his or her
pay is again sufficient to permit the resumption of installment payments, must
pay in cash the amount of the deficiency in his or her account or arrange for
uniformly increased installment payments so that, assuming the maximum purchase
price per share, payment for the maximum number of shares covered by the
Employee's option will be completed in the last month of the Purchase Period. If
the Eligible Employee elects to make increased installment payments, he or she
may, nevertheless, at any time make up the remaining deficiency by a lump sum
payment.
Subject to the above and other provisions of the Plan permitting
postponement, the Company may treat the failure by an Eligible Employee to make
any payment as a cancellation of his or her election to purchase shares. Such
cancellation will be effected by mailing notice to the Employee at the
Employee's last known business or home address. Upon such mailing, the
Employee's only right will be to receive in cash the amount credited to his or
her account.
15. Retirement
If an Eligible Employee retires in accordance with Company policy and
has an election to purchase shares in effect at the time of the Employee's
retirement, he or she may, within three months after the date of retirement
(but, in no event later than the end of the Purchase Period), by delivering
written notice to the office or person designated to receive elections, elect
to:
(a) Complete the remaining installment payments in cash,
(b) Make a lump sum payment in the amount of any deficiency
for the remaining portion of the Purchase Period, or
(c) Cancel the election to purchase shares in accordance with the
provisions of Paragraph 12.
If no such notice is given within such period, the election will be
deemed canceled as of the date of retirement and the only right of the Eligible
Employee will be to receive in cash the amount credited to his or her account.
16. Death
If an Eligible Employee, including a retired Eligible Employee, dies
and has an election to purchase shares in effect at the time of death, the legal
representative of the deceased Eligible Employee may, within three months from
the date of death (but in no event later than the end of the Purchase Period by
delivering written notice to the office or person designated to receive
elections, elect to:
(a) Complete the remaining installment payments in cash,
(b) Make a lump sum payment in the amount of any deficiency
for the remaining portion of the Purchase Period, or
(c) Cancel the election to purchase shares in accordance with the
provisions of Paragraph 12.
If no such notice is given within such period, the election will be
deemed canceled as of the date of death, and the only right of such legal
representative will be to receive in cash the amount credited to the deceased
Eligible Employee's account.
17. Termination Of Employment Other Than For Retirement Or Death
If an Eligible Employee is terminated for any reason other than
retirement or death prior to the end of the Purchase Period, the Employee's
election to purchase shall thereupon be deemed canceled as of the date on which
employment ended. In such an event, no further payments under such election will
be permitted, and the Eligible Employee's only right will be to receive in cash
the amount credited to his or her account.
18. Application Of Funds
All funds received by the Company in payment for shares to be purchased
under the Plan and held at any time by the Company may be used for any valid
corporate purpose.
19. Governmental Approvals Or Consents
The Plan shall not be effective unless it is approved by the
stockholders of the Company within 12 months after the Plan is proposed for
approval by the Board of Directors of the Company. The Plan and any offerings
and sales to Eligible Employees under it are subject to any governmental
approvals or consents that may be or become applicable in connection therewith.
The Board of Directors of the Company may make such changes in the Plan and
include such terms in any offering under the Plan as may be necessary or
desirable, in the opinion of counsel, so that the Plan will comply with the
rules and regulations of any governmental authority and so that Eligible
Employees participating in the Plan will be eligible for tax benefits under the
United States Internal Revenue Code or the laws of any state.
(a) Allocate the Designated Shares on a pro rata basis among the
participating Eligible Employees in proportion to the number
of shares otherwise purchasable by each participating Eligible
Employee prior to the allocation contemplated by this
Paragraph; and
(b) Return to each participating Eligible Employee any amount
credited to their accounts which is not utilized to purchase
shares. Interest at a rate to be set by the Committee shall be
paid on all amounts returned to Eligible Employees pursuant to
this Paragraph 19(b) only. For the purpose of computing
interest, it will be assumed that shares were purchased with
the earlier credits or payments and that all to-be-returned
funds resulted from payments closest to the end of the
Purchase Period.
IN WITNESS WHEREOF, the Committee for the Plan has caused this
instrument to be duly executed by the authorized members of the Committee this
22nd day of May, 1997.
EXHIBIT 10.21
B - 1
AMENDMENT TO THE
CITIZENS UTILITIES COMPANY
1996 EQUITY INCENTIVE PLAN
The 1996 Equity Incentive Plan is proposed to be amended by the
restatement of subsections 6(a) and 6(b). The remaining subsections of Section 6
are to be unchanged, but are set forth for the reader's convenience. Section 6,
as proposed to be amended, is set forth below:
Section 6. Performance Shares
(a) The Committee may award Performance Shares to Participants under the
Plan, which may be denominated in Stock or in dollars. The Committee
shall determine the performance periods (the "Performance Periods")
and the performance objectives relating to each Performance Share
Award. Performance objectives may vary from Participant to Participant
and between groups of Participants, and shall only be based upon any
one or more of the following performance criteria, any combination
and/or specifics of which shall be determined by the Committee as it
may deem appropriate: (i) stock price; (ii) market share; (iii) sales;
(iv) earnings per share; (v) operating cash flow; (vi) free cash flow;
(vii) net income or loss; (viii) net income or loss adjusted to
exclude specified items such as gain or losses from extraordinary or
non-recurring items and non-cash expense and income, and before
specified expense items such as interest, depreciation, amortization
and income taxes; (ix) EBITDA; (x) revenues; (xi) return on equity or
assets; or (xii) cost control. Performance objectives may be in
respect to the performance of the Company and its subsidiaries or a
particular subsidiary or division and may be expressed in absolute
terms or in relation to another company or companies or a division
thereof. Performance Periods may overlap and Participants may
participate simultaneously with respect to Performance Shares for
which different Performance Periods are prescribed.
(b) At the beginning of each Performance Period, (but in any event prior
to the earlier of the elapsing of 90 days or 25% of such Performance
Period) the Committee shall determine and set forth in writing for
each Participant or group of Participants the number of Performance
Shares or the dollar value of the Performance Share Awards made and
the applicable performance objectives, each of which may be fixed or
may be expressed in terms of a progression within a specified range.
At the end of each Performance Period, the Committee shall certify in
writing the extent to which the prescribed performance objectives have
been satisfied. An Eligible Employee shall be eligible to be awarded,
in any calendar year, Performance Share Awards up to the maximum
number of shares contemplated in Section 4(e) and shall also be
eligible to be awarded Performance Share Awards denominated in dollars
subject to a maximum limitation of $500,000 for all such
dollar-denominated Awards granted to any Eligible Employee in any
calendar year.
(c) If during the course of a Performance Period there shall occur
significant events as determined by the Committee, including, but not
limited to, a reorganization of the Company, which the Committee
expects to have a substantial effect on a performance objective during
such period, the Committee may revise such objective.
(d) If a Participant terminates service with all Participating Companies
during a Performance Period because of death, Total Disability, or a
significant event, as determined by the Committee, that Participant
shall be entitled to payment in settlement of each Performance Share
for which the Performance Period was prescribed (i) based upon the
performance objectives satisfied at the end of such period and (ii)
prorated for the portion of the Performance Period during which the
Participant was employed by any Participating Company; provided,
however, the Committee may provide for an earlier payment in
settlement of such Performance Share in such amount and under such
terms and conditions as the Committee deems appropriate or desirable
with the consent of the Participant. If a Participant terminates
service with all Participating Companies during a Performance Period
for any other reason, then such Participant shall not be entitled to
any payment with respect to that Performance Period unless the
Committee shall otherwise determine.
e) Each Performance Share may be paid in whole shares of Stock, including
Restricted Stock or Deferred Stock (together with any cash
representing fractional shares of Stock), or cash, or a combination of
Stock and cash either as a lump sum payment or in annual installments,
all as the Committee shall determine, at the time of grant of the
Performance Share or otherwise, commencing as soon as practicable
after the end of the relevant Performance Period. Any dividends or
distributions payable on Performance Shares (or the equivalent as
specified in the grant), other than cash dividends representing the
periodic distribution of profits which shall be retained by the
Company, shall be paid over to the Participant when and if payment is
made of the underlying Performance Shares, unless the grant provides
otherwise.
Except as otherwise provided in this Section 6, no Performance Shares
awarded to Participants shall be sold, exchanged, transferred,
pledged, hypothecated or otherwise disposed of during the Performance
Period unless the Committee determines that an Award may be
transferred to a Family Member or Family Trust or other transferee.
A copy of the Plan as amended may be obt
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CITIZENS UTILITIES COMPANY AND SUBSIDIARIES' CONSOLIDATED FINANCIAL
STATEMENTS FOR THE PERIODS ENDED JUNE 30, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000020520
<NAME> CITIZENS UTILITIES COMPANY
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<BOOK-VALUE> PER-BOOK PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,278,372 3,278,372
<OTHER-PROPERTY-AND-INVEST> 443,663<F1> 443,663<F1>
<TOTAL-CURRENT-ASSETS> 312,587 312,587
<TOTAL-DEFERRED-CHARGES> 158,218<F2> 158,218<F2>
<OTHER-ASSETS> 246,755<F3> 246,755<F3>
<TOTAL-ASSETS> 4,439,595 4,439,595
<COMMON> 61,281 61,281
<CAPITAL-SURPLUS-PAID-IN> 1,447,261 1,447,261
<RETAINED-EARNINGS> 65,934 65,934
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,568,609 1,568,609
201,250<F4> 201,250<F4>
0 0
<LONG-TERM-DEBT-NET> 1,557,155 1,557,155
<SHORT-TERM-NOTES> 0 0
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 8,700 8,700
0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,669,736 2,669,736
<TOT-CAPITALIZATION-AND-LIAB> 4,439,595 4,439,595
<GROSS-OPERATING-REVENUE> 306,141 678,633
<INCOME-TAX-EXPENSE> (57,949) (42,322)
<OTHER-OPERATING-EXPENSES> 42,590<F5> 123,349
<TOTAL-OPERATING-EXPENSES> 464,262 774,673
<OPERATING-INCOME-LOSS> (158,121) (96,040)
<OTHER-INCOME-NET> 6,841 19,125
<INCOME-BEFORE-INTEREST-EXPEN> (151,280) (76,915)
<TOTAL-INTEREST-EXPENSE> 28,694 55,710
<NET-INCOME> (123,577) (93,407)
1,552<F4> 3,104
<EARNINGS-AVAILABLE-FOR-COMM> (123,577) (93,407)
<COMMON-STOCK-DIVIDENDS> 0 0
<TOTAL-INTEREST-ON-BONDS> 0 0
<CASH-FLOW-OPERATIONS> 0 101,555
<EPS-PRIMARY> (.51) (.39)
<EPS-DILUTED> (.51) (.39)
<FN>
<F1>REPRESENTS INVESTMENT FUNDS.
<F2>REPRESENTS REGULATORY ASSETS.
<F3>DEFERRED DEBITS AND OTHER ASSETS.
<F4>COMPANY OBLIGATED MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED SECURITIES
OF A SUBSIDIARY TRUST, THE SOLE ASSETS OF WHICH ARE SECURITIES OF A
SUBSIDIARY PARTNERSHIP, SUBSTANTIALLY ALL THE ASSETS OF WHICH ARE
CONVERTIBLE DEBENTURES OF THE COMPANY.
<F5>REPRESENTS COMMODITIES PURCHASED
</FN>
</TABLE>
