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
CUC 401(k) Employee Benefit 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 on its behalf
by the duly undersigned thereunto duly authorized.
Date: June 26, 1997 By: Citizens Utilities Company,
Plan Administrator of the
CUC 401(k) Employee Benefit Plan
By: Livingston E. Ross
----------------------
Livingston E. Ross
Vice President and Controller
<PAGE>
CUC 401(k) Employee Benefit 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
CUC 401(k) Employee Benefit Plan:
We have audited the accompanying Statements of Net Assets Available for Benefits
of the CUC 401(k) Employee Benefit 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>
CUC 401(k) Employee Benefit Plan
Statements of Net Assets Available for Benefits
at December 31, 1996 and 1995
Assets 1996 1995
- ------ ---- ----
Investment:
Stock Fund - at market value
(Cost $49,611,354 in 1996 and $41,969,019 in 1995) $ 66,163,785 $69,716,659
Guaranteed Income Fund - at contract value 23,632,971 19,950,741
Equity Fund - at market value
(Cost $13,272,985 in 1996 and $8,331,326 in 1995) 17,404,943 10,231,636
Bond Fund - at market value
(Cost $2,972,237 in 1996 and $2,059,493 in 1995) 3,048,696 2,190,353
Loans receivable 4,258,639 3,325,563
Cash and cash equivalents 514,214 575,941
Employer's contribution receivable 243,164 225,478
Participants' contribution receivable 662,873 612,130
Other receivables 370,409 245,127
------------ ------------
Total Assets $116,299,694 $107,073,628
------------ ------------
Liabilities
- -----------
Account Payable -- --
------------- -------------
Total Liabilities -- --
------------- -------------
Net Assets Available for Benefits $116,299,694 $107,073,628
============ ============
See accompanying notes to financial statements
Page 4
<PAGE>
CUC 401(k) Employee Benefit 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>
Stock Guaranteed Equity Bond
Fund Income Fund Fund Fund Loans Total
Investment Income:
Dividends $ -- $ -- $ 364,913 $ -- $ -- $ 364,913
Interest 179,075 186,732 37,705 195,020 8,427 606,959
Net (Depreciation)
Appreciation
in Fair Value
of Investments (4,882,872) 1,189,402 2,580,163 (47,722) -- (1,161,029)
Contributions:
Participants' 3,673,941 2,135,540 2,738,671 472,676 -- 9,020,828
Employer 2,986,191 34,267 34,667 6,851 -- 3,061,976
---------- ---------- ----------- --------- --------- ------------
Total Contributions 6,660,132 2,169,807 2,773,338 479,527 12,082,804
---------- ---------- ----------- --------- --------- ------------
Net transfers-other (2,097,287) (222,978) 1,240,138 (8,540) 1,088,667 --
Net transfers-loans (1,854) 25,149 4,061 (1,249) (26,107) --
Distribution:
Benefits Paid to
Participants (5,938,900) (2,222,389) (691,064) (151,286) (137,911) (9,141,550)
Participants'
contributions used
for life insurance
premium payments (6,427) (1,898) (1,387) (361) -- (10,073)
---------- ---------- ----------- --------- --------- -----------
Total
Distributions (5,945,327) (2,224,287) (692,451) (151,647) (137,911) (9,151,623)
---------- ---------- ----------- --------- --------- -----------
Change in Net Assets
before Transfers (6,088,133) 1,123,825 6,307,867 465,389 933,076 2,742,024
---------- ---------- ----------- --------- --------- ------------
Transfers into Plan:
ALLTEL Savings Plan 2,463,167 2,592,730 1,032,257 395,888 -- 6,484,042
Net Assets Available
for Benefits:
Beginning of year 70,884,689 20,127,733 10,509,460 2,226,183 3,325,563 107,073,628
----------- ----------- ----------- ---------- ---------- ------------
End of year $67,259,723 $23,844,288 $17,849,584 $3,087,460 $4,258,639 $116,299,694
=========== =========== =========== ========== ========== ============
</TABLE>
Page 5
<PAGE>
CUC 401(k) Employee Benefit 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) Employee Benefit 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. The plan is a voluntary defined contribution plan.
Under the terms of the Plan, non-bargaining unit employees who
have attained 30 days of service are eligible to participate
in the Plan. Enrollment dates are on January 1 and July 1 of
each year. At December 31, 1996 there were 3,312 employees
eligible to participate in the Plan and 3,194 are
participating in the Plan.
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 elect to continue 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 was as follows:
Number of
Accounts
--------
Investment Option:
Stock Fund 3,119
Guaranteed Income Fund 1,764
Equity Fund 1,581
Bond Fund 668
Loan Fund 672
Life Insurance 40
The Company contribution is determined for each Plan year by
the Board of Directors of the Company. The Company
contribution for the 1996 and 1995 Plan years amounted 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>
CUC 401(k) Employee Benefit 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 become 100% vested in the Company contributions
and the related earnings on the Company 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 Contribution
Years of Service and 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: the Company's 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 shares 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
366,476 in 1996 and 339,132 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
Contribution Period Guaranteed Income Contract Issuer Maturity Rate of
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%
3/6/96 Life of Virginia 6/30/01 6.11%
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 6/30/97 7.30%
Prior to 12/31/93 AUSA Life Insurance Company 6/10/97 5.00%
7/1/91 to 6/30/92 General American Life Insurance
Company 6/30/96 8.30%
</TABLE>
Page 7
<PAGE>
CUC 401(k) Employee Benefit 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 the 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 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.
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.
Page 8
<PAGE>
CUC 401(k) Employee Benefit Plan
Notes to Financial Statements
Years Ended December 31, 1996 and 1995
h. Forfeitures. At December 31, 1996 and 1995, forfeited
nonvested Company contributions totaled $128,812 and
$76,954, respectively. These amounts are used to reduce the
future obligation of the Company to make contributions to
the Plan.
i. Administrative 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 are
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. 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.
(3) Investment of 5% or more of the Net Assets Available for Plan Benefits
----------------------------------------------------------------------
At December 31, 1996 the Plan had $66,163,785, $23,632,971 and $17,404,943
invested in 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.
Page 9
<PAGE>
CUC 401(k) Employee Benefit Plan
Notes to Financial Statements
Years Ended December 31, 1996 and 1995
(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 $123,094 in 1996.
(5) Transfer from Other Plans
-------------------------
Effective November 1, 1995, participants in the ALLTEL Savings Plan from
the acquired ALLTEL properties in Arizona, New Mexico, Utah and California
became participants in the Plan. 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 $6,484,042 in 1996
were transferred to the Plan.
(6) Termination of Plan
-------------------
The Company's Board of Directors has the right under the terms of the Plan
to discontinue Company contributions at any time and may terminate the
Plan, subject to 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 October 26, 1994, 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
CUC 401(k) Employee Benefit Plan
Item 27a- Schedule of Assets Held for Investment Purposes
December 31, 1996
<TABLE>
<CAPTION>
<S> <C> <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 CitizensUtilities Company
Common Stock Series B $5,947,307 $49,611,354 $66,163,785
========== =========== ===========
Guaranteed Income Fund
----------------------
Allstate Life Insurance Company Guaranteed Income Contract 2,088,624 2,088,624
Allstate Life Insurance Company Guaranteed Income Contract 1,435,798 1,435,798
AUSA Life Insurance Company Guaranteed Income Contract 1,513,814 1,513,814
CIGNA Guaranteed Income Contract 2,884,147 2,884,147
John Hancock Mutual Life
Insurance Company Guaranteed Income Contract 2,759,311 2,759,311
Life of Virginia Guaranteed Income Contract 3,540,651 3,540,651
New York Life Insurance Company Guaranteed Income Contract 560,519 560,519
Pacific Mutual Life Insurance
Insurance Company Guaranteed Income Contract 2,599,125 2,599,125
PNC Bank Guaranteed Investment Fund 1,711,834 1,711,834
Principal Mutual Life
Insurance Company Guaranteed Income Contract 1,980,326 1,980,326
Principal Mutual Life
Insurance Company Guaranteed Income Contract 2,558,822 2,558,822
----------- -----------
Total Guaranteed Income 2,064,266 $23,632,971 $23,632,971
========= =========== ===========
Equity Fund
-----------
Vanguard Group Vanguard Index Trust
Fund 251,662 $13,272,985 $17,404,943
======= =========== ===========
Bond Fund
---------
Vanguard Group Vanguard GNMA Fund 298,303 $ 2,972,237 $ 3,048,696
======== ============ ==========
Loan Fund
---------
Participants'Loans
Receivable $ 4,258,639 $ 4,258,639
=========== ==========
Cash
----
Compass Capital Compass Capital Money
Market Fund
$ 514,214 $ 514,214
=========== ==========
</TABLE>
See Independent Auditors' Report
Page 11
<PAGE>
Citizens Utilities 401(k) Benefits 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>
Expenses Current Value
Incurred of Asset on
Purchase Selling Lease with Cost of Transaction Net Gain
Issuer Description of Asset Price Price Rental Transaction Asset Date /(Loss)
- ------------------ ------------------------ ---------- ---------- -------- ----------- ---------- ------------ ----------
Citizens Utilities Citizens Utilities Company
Company Series B Common Stock $5,813,475 $ -- $ -- $ -- $5,813,475 $5,813,475 $ --
Citizens Utilities Citizens Utilities Company
Company Series B Common Stock -- 1,987,677 -- -- 1,248,917 1,987,677 738,760
PNC Bank Investment Contract Fund 7,866,830 -- -- -- 7,866,830 7,866,830 --
PNC Bank Investment Contract Fund -- 9,688,617 -- -- 9,582,246 9,688,617 106,371
Life of Virginia Life of Virginia 4,163,668 -- -- -- 4,163,668 4,163,668 --
Life of Virginia Life of Virginia -- 640,965 -- -- 640,965 640,965 --
Vanguard Group Vanguard GNMA 1,325,061 -- -- -- 1,325,061 1,325,061 --
Vanguard Group Vanguard GNMA -- 419,124 -- -- 413,848 419,124 5,276
Vanguard Group Vanguard Index Trust 6,587,272 -- -- -- 6,587,272 6,587,272 --
Vanguard Group Vanguard Index Trust -- 1,994,874 -- -- 1,811,623 1,994,874 183,251
</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. 33-48683) 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 CUC
401 (k) Employee Benefit Plan as of December 31, 1996 and
1995 and the related Statement of Changes in Net Assets
Available for Benefits and the 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 the
CUC 401(k) Employee Benefit Plan.
KPMG PEAT MARWICK LLP
New York, New York
June 26, 1997
