-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, s0uoxVXgRjLtyTNfcE9OUuIyk7z4kvrbJHPlVc19TUyic6VyImC+rNUOy9hufNC5 S8kh5Z5hsKLIMW9ccLmx8w== 0000020520-94-000024.txt : 19941116 0000020520-94-000024.hdr.sgml : 19941116 ACCESSION NUMBER: 0000020520-94-000024 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CITIZENS UTILITIES CO CENTRAL INDEX KEY: 0000020520 STANDARD INDUSTRIAL CLASSIFICATION: 4931 IRS NUMBER: 060619596 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11001 FILM NUMBER: 94559972 BUSINESS ADDRESS: STREET 1: HIGH RIDGE PK BLDG 3 STREET 2: P O BOX 3801 CITY: STAMFORD STATE: CT ZIP: 06905 BUSINESS PHONE: 2033298800 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1994 ------------------ Commission file number 0-1291 ------ 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 October 31, 1994 Common Stock Series A 132,891,159 Common Stock Series B 57,347,198 CITIZENS UTILITIES COMPANY AND SUBSIDIARIES ------------------------------------------- INDEX ----- Page No. ________ Part I. Financial Information Consolidated Condensed Balance Sheets September 30, 1994 and December 31, 1993 2 Consolidated Condensed Statements of Income for the Three Months Ended September 30, 1994 and 1993 3 Consolidated Condensed Statements of Income for the Nine months Ended September 30, 1994 and 1993 4 Consolidated Condensed Statements of Cash Flows for the Nine months Ended September 30, 1994 and 1993 5 Notes to Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Part II. Other Information 10 Signature 11 -1- PART I. FINANCIAL INFORMATION ------------------------------ CITIZENS UTILITIES COMPANY AND SUBSIDIARIES ------------------------------------------- CONSOLIDATED CONDENSED BALANCE SHEETS ------------------------------------- (In thousands) September December 30, 1994 31, 1993 --------- --------- ASSETS ------ Current assets: Cash and cash equivalents $ 18,139 $ 21,738 Temporary investments 77,449 89,752 Accounts receivable 149,015 114,313 Other 31,897 14,934 ----------- ----------- 276,500 240,737 ----------- ----------- Property, plant and equipment 3,229,253 2,153,891 Less accumulated depreciation 911,776 461,924 ----------- ---------- 2,317,477 1,691,967 ----------- ---------- Investments 382,766 411,022 Regulatory assets 149,559 146,207 Deferred debits and other assets 227,066 137,185 ---------- ---------- $3,353,368 $ 2,627,118 ========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current liabilities: Long-term debt due within one year $ 10,728 $ 1,620 Short-term debt 652,270 380,000 Other 261,948 246,605 ---------- ---------- 924,946 628,225 Customer advances for construction and contributions in aid of construction 206,863 184,253 Deferred income taxes 247,294 213,471 Regulatory liabilities 26,931 28,376 Deferred credits and other liabilities 92,911 50,634 Long-term debt 740,980 547,673 ---------- ---------- 2,239,925 1,652,632 ---------- ---------- Shareholders' equity: Common stock issued, $.25 par value Series A 33,220 32,447 Series B 14,309 13,119 Additional paid-in capital 818,758 698,688 Retained earnings 234,704 230,232 Unrealized gain on securities classified as available for sale 12,452 - ---------- ---------- 1,113,443 974,486 ---------- ---------- $3,353,368 $2,627,118 ========== ========== The accompanying Notes are an integral part of these Financial Statements. -2- PART I. FINANCIAL INFORMATION (Continued) ------------------------------------------ CITIZENS UTILITIES COMPANY AND SUBSIDIARIES ------------------------------------------- CONSOLIDATED CONDENSED STATEMENTS OF INCOME ------------------------------------------- FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993 ------------------------------------------------------ (In thousands, except per-share amounts) 1994 1993 ---- ---- Revenues $242,308 $145,315 Expenses: Operating expenses 146,183 90,234 Depreciation 33,640 13,106 -------- -------- 179,823 103,340 -------- -------- Income from operations 62,485 41,975 Other income, net 14,531 14,476 Interest expense 20,613 9,107 ------- -------- Income before income taxes 56,403 47,344 Income taxes 17,716 13,075 -------- -------- Net income $ 38,687 $ 34,269 -------- -------- Earnings per share of common stock: Series A $.21 $.18 ==== ==== Series B $.21 $.18 ==== ==== Number of common shares outstanding at September 30: Series A Common Stock 132,880 129,829 Series B Common Stock 57,236 49,703 Dividends declared on common stock: In Series A shares on Series A Common Stock and in Series B shares on Series B Common Stock paid quarterly - rate 1.3% 1.1% ==== ==== The accompanying Notes are an integral part of these Financial Statements. -3- PART I. FINANCIAL INFORMATION (Continued) ------------------------------------------ CITIZENS UTILITIES COMPANY AND SUBSIDIARIES ------------------------------------------ CONSOLIDATED CONDENSED STATEMENTS OF INCOME ------------------------------------------- FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993 ----------------------------------------------------- (In thousands, except per-share amounts) 1994 1993 ---- ---- Revenues $654,878 $457,400 Expenses: Operating expenses 403,181 290,005 Depreciation 83,659 41,386 -------- --------- 486,840 331,391 -------- --------- Income from operations 168,038 126,009 Other income, net 37,892 36,346 Interest expense 48,575 28,702 -------- -------- Income before income taxes 157,355 133,653 Income taxes 48,997 36,463 -------- --------- Net income $108,358 $ 97,190 ======== ========= Earnings per share of common stock: Series A $.58 $.52 ==== ==== Series B $.58 $.52 ==== ==== Number of common shares outstanding at September 30: Series A Common Stock 132,880 129,829 Series B Common Stock 57,236 49,703 Dividends declared on common stock: In Series A shares on Series A Common Stock and in Series B shares on Series B Common Stock paid quarterly - compounded rate 3.59% 3.34% ===== ===== The accompanying Notes are an integral part of these Financial Statements. -4- PART I. FINANCIAL INFORMATION (Continued) ------------------------------------------ CITIZENS UTILITIES COMPANY AND SUBSIDIARIES ------------------------------------------- CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS ----------------------------------------------- FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993 ----------------------------------------------------- (In thousands) 1994 1993 ---- ---- Net cash provided by operating activities $133,885 $130,167 -------- -------- Cash flows from investing activities: Construction expenditures (143,265) (84,774) Securities purchases (39,194) (269,662) Securities sales 39,577 178,218 Securities maturities 65,842 55,468 Business acquisitions (527,866) -- Other, net 30,946 (2,375) -------- -------- (635,852) (123,125) -------- -------- Cash flows from financing activities: Long-term debt borrowings 227,776 33,289 Long-term debt principal payments (13,177) (26,440) Short-term debt borrowings 272,270 -- Other, net 11,499 8,112 -------- -------- 498,368 14,961 -------- -------- Increase (decrease) in cash and cash equivalents (3,599) 22,003 Cash and cash equivalents at January 1, 21,738 19,752 -------- -------- Cash and cash equivalents at September 30, $18,139 $41,755 ======== ========= The accompanying Notes are an integral part of these Financial Statements. -5- PART I. FINANCIAL INFORMATION (Continued) ----------------------------------------- CITIZENS UTILITIES COMPANY AND SUBSIDIARIES ------------------------------------------- NOTES TO FINANCIAL STATEMENTS ----------------------------- (1) The consolidated financial statements include the accounts of Citizens Utilities Company and all subsidiaries after elimination of intercompany balances and transactions. All adjustments, which consist of only normal recurring accruals, necessary for a fair statement of the results for the interim periods have been made. (2) Earnings per share is based on the average number of outstanding shares, adjusted for intervening stock dividends and stock splits. Earnings per share is presented for each Series separately, with historical adjustment for stock dividends and stock splits for each Series. The effect on earnings per share of outstanding stock options is immaterial. (3) In accordance with applicable regulatory systems of account, an allowance for funds used during construction is included in the cost of additions to property, plant and equipment and is allowed in rate base for rate making purposes. The allowance is not a cash item. The amount relating to equity is included in Other income, net and the amount relating to borrowings is offset against Interest expense. (4) On December 22, 1993, Natural Gas Company of Louisiana ("NGL") was merged into the company in a transaction accounted for as a pooling of interests. The company's income statements and statement of cash flows at September 30, 1993 have been restated to include the results of NGL's operations for the three and nine months ended September 30, 1993. On August 31, 1994, Metro Utility Company ("Metro") was merged into the company. The transaction was also accounted for as a pooling of interests. The results of Metro for the three and nine months ended September 30, 1994 have been included in the consolidated financial statements of the company. However, prior year financial statements have not been restated because the amounts are not significant. The following pro forma financial information for the nine months ended September 30, 1994 and 1993, presents the combined results of operations of the Company and the New York GTE Telephone property acquired on June 30, 1994 and the Idaho, Tennessee, Utah, and West Virginia properties acquired on December 31, 1993 as if the acquisitions had occurred at the beginning of the respective periods. The pro forma financial information does not necessarily reflect the results of operations that would have occurred had the Company and the GTE Telephone properties constituted a single entity during such periods. September 30, 1994 September 30, 1993 ------------------ ------------------ Revenues $ 749,656,000 $ 720,846,000 Net Income $ 120,622,000 $ 112,715,000 Earnings Per Share $ .58 $ .53 -6- PART I. FINANCIAL INFORMATION (Continued) ----------------------------------------- CITIZENS UTILITIES COMPANY AND SUBSIDIARIES ------------------------------------------- NOTES TO FINANCIAL STATEMENTS ----------------------------- (5) Effective January 1, 1994, the company adopted Statements of Financial Accounting Standards ("SFAS") No. 112 "Employers' Accounting for Postretirement Benefits" and SFAS No. 115 "Accounting for Certain Investments in Debt and Equity Securities". The company applied the provisions of these accounting standards prospectively. SFAS No. 112 requires the accrual of the expected costs of providing benefits, if any, to former or inactive employees after termination of employment for reasons other than retirement. Adoption of SFAS No. 112 did not have a material effect on the Consolidated Financial Statements. Adoption of SFAS No. 115 requires fair value reporting for certain investments in debt and equity securities. Pursuant to the provisions of SFAS 115, the company classified its Temporary investments and Investments into two categories, "held-to-maturity" ($389,539,000 at September 30, 1994) and "available-for-sale" ($51,193,000 at September 30, 1994). The company recorded unrealized holding gains on securities classified as available-for- sale as an increase to investments. Available for Sale Held to Maturity ------------------ ---------------- Aggregate fair value $ 70,676,000 $467,327,000 Gross unrealized holding gains 19,483,000 77,788,000 Amortized cost basis 51,193,000 389,539,000 Held to Maturity Securities --------------------------- Contractual Maturities Fair Value Amortized Cost - ---------------------- ---------- -------------- Within 1 year $121,312,000 $120,860,000 2-5 years 170,330,000 170,131,000 6-10 years 18,112,000 17,647,000 Thereafter 157,573,000 80,901,000 There were no sales of securities classified as held-to-maturity. The change in the net unrealized gains on available-for-sale securities that was included in a separate component of shareholders' equity was $12,452,000. The company does not invest in securities classified as trading securities. The amortized cost and realized gains and losses on available-for-sale securities sold during the nine months ended September 30, 1994 were $39,577,000, $251,000 and ($21,000), respectively. -7- PART I. FINANCIAL INFORMATION (Continued) ------------------------------------------ CITIZENS UTILITIES COMPANY AND SUBSIDIARIES ------------------------------------------- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ---------------------------------------------------------------- (a) Liquidity and Capital Resources ------------------------------- For the nine months ended September 30, 1994, the primary source of funds was from operations. Funds requisitioned from the 1993, 1992, and 1991 Series Industrial Development Bond construction fund trust accounts were used to pay for construction of utility plant. Commercial paper notes payable in the amount of $699,000,000 were outstanding at September 30, 1994, of which $652,270,000 is classified as short-term debt as it represents the balance of the amount that was issued to temporarily and partially fund the GTE Telephone Properties acquired on December 31, 1993 and June 30, 1994. The $652,270,000 of commercial paper is expected to be repaid from maturing temporary investments, funds from operations and proceeds from the planned issuance of securities. On April 20, 1994, the company issued $175,000,000 of debentures at par with an interest rate of 7.6% and a maturity date of June 1, 2006. On October 6, 1994, the company issued $100,000,000 of debentures at par with an interest rate of 7.68% and a maturity date of October 1, 2034. The proceeds from the sale of the debentures were used to permanently fund the GTE Telephone Properties acquired on December 31, 1993 and June 30, 1994 and to repay commercial paper notes outstanding at September 30, 1994. On June 16, 1994 and on September 9,1994, Citizens Utilities Rural Telephone Company, Inc., a subsidiary of the company, under the Rural Telephone Bank Loan Contract, was advanced $2,394,000 and $3,848,000 respectively. These funds bear an interest rate of 5.31% and 5.3% respectively and have an ultimate maturity date of December 31, 2027. On September 28, 1994, the company arranged the company arranged for the composite issuance of $14,640,000 of 1994 Series Industrial Development Revenue Bonds; the bonds were issued as demand purchase bonds with an interest rate of 6.6% and a maturity date of May 1, 2029. On August 16, 1994, the company filed a shelf-registration statement with the Securities and Exchange Commission to offer up to 1,600,000 shares of Common Stock Series A and Common Stock Series B of which 491,594 were issued to partially fund the acquisition of RHC, Inc. (Metro) on August 31, 1994 and to register restricted shares previously issued for the 1993 acquisitions of Natural Gas Company of Louisiana and Franklin Electric Light Company, Incorporated and for other corporate purposes. 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 a decrease in its working capital at September 30, 1994. The decrease is primarily due to the issuance of short-term debt used to partially fund the acquisition of the GTE Telephone Properties on December 31, 1993 and June 30, 1994. The company has lines of credit with commercial banks under which it may borrow up to $1,200,000,000. There were no amounts outstanding under these lines at September 30, 1994. During the nine months ended September 30, 1994, the company was authorized net increases in annual revenues for properties in Arizona, California, Pennsylvania and Vermont totaling $6,396,000. The company has requests for increases pending before regulatory commissions in Arizona, California, Hawaii and Ohio. On September 22, 1994, the company received approval from the Montana Public Service Commission to purchase 7,000 telephone access lines in Montana from GTE Corp. On September 30, 1994, through a joint venture with Century Communications Corporation, the company acquired cable television system servicing approximately 24,000 subscribers in Southern California. -8- PART I. FINANCIAL INFORMATION (Continued) ------------------------------------------ CITIZENS UTILITIES COMPANY AND SUBSIDIARIES ------------------------------------------- (b) Results of Operations --------------------- Operating revenues increased to $242,308,000 for the three month period ended September 30, 1994, a 67% increase compared to the same period last year primarily due to increased telecommunications revenues. Telecommunications revenues for the third quarter of 1994 totaled $138,254,000 almost tripling the $46,259,000 earned in the 1993 third quarter. Operating revenues for the nine month period ended September 30, 1994 increased to $654,878,000, a 43% increase compared to the same period in 1993 primarily due to increased telecommunications and natural gas revenues. Telecommunications revenues for the nine months totaled $311,739,000, compared with the 1993 amount of $134,950,000. The increases in telecommunications revenues for both the quarter and nine months ended September 30, 1994 were primarily due to revenues derived from operating the GTE Telephone Properties acquired on December 31, 1993 and June 30, 1994. Natural gas revenues for the nine months totaled $157,078,000, a 7% increase over the 1993 amount of $146,888,000. The increase was primarily due to $7,154,000 from increased average revenue per MCF of gas sold to residential and commercial customers and $1,266,000 from increased consumption as a result of colder weather conditions. Operating expenses for the three months ended September 30, 1994 were $179,822,000 a $76,481,000 increase compared to the like 1993 period primarily due to increased telecommunications operating expenses. Operating expenses for the nine months ended September 30, 1994 increased from the like 1993 period primarily due to increased natural gas purchased and telecommunications operating expenses. Natural gas purchased totaled $88,076,000, a 14% increase over the 1993 amount of $77,584,000 primarily due to higher supplier prices and increased volume to satisfy increased customer consumption. Depreciation expense for the three and nine months ended September 30, 1994 increased $20,533,000 and $42,272,000, respectively, compared to the like 1993 periods primarily due to operation of the GTE Telephone Properties acquired on December 31, 1993 and June 30, 1994. Other income, net for the three and nine months ended September 30, 1994, increased compared to the like 1993 periods primarily due to increases in the allowance for funds used during construction as a result of increased construction of utility property, plant and equipment. The increase is partially offset by lower investment income as a result of the liquidation of investment balances to fund the purchase of the local telephone access lines acquired on December 31, 1993 and June 30, 1994. Interest expense for the three and nine months ended September 30, 1994 increased $11,507,000 and $19,874,000 respectively compared with the like 1993 periods primarily as a result of the issuance of debt securities, the proceeds of which were used to partially finance the acquisition of the GTE Properites and an increase in industrial development revenue bond borrowings. The increase in interest expense is partially offset by increased allowance for funds used during construction related to borrowings. Income taxes for the three and nine months ended September 30, 1994 increased $4,641,000 and $12,535,000 respectively compared to the like 1993 periods primarily due to increased taxable income which can be attributed mostly to the GTE Telephone Properties acquired on December 31, 1993 and June 30, 1994. -9- PART II. OTHER INFORMATION --------------------------- CITIZENS UTILITIES COMPANY AND SUBSIDIARIES ------------------------------------------- Item 1. Legal Proceedings ----------------- Reference is made to information describing certain legal matters under Item 3 "Legal Proceedings" in the company's Form 10-K for the year ended December 31, 1993. In May, 1994, the Delaware Court of Chancery granted the defendants' motion for a stay of proceedings in the Thorpe and Biggs action referred to in the third paragraph of Legal Proceedings in the company's 1993 Annual Report, Form 10-K, pending resolution of the settlement proceedings referred to in the fourth paragraph of Legal Proceedings in the company's 1993 Annual Report, Form 10-K. Discovery to confirm the reasonableness of the settlement terms reflected in the Memorandum of Understanding has been substantially completed. In September 1992, the United States Environmental Protection Agency filed a complaint with the United States District Court for the Northern District of Illinois relating to alleged violations by the company's Illinois subsidiary with respect to National Pollutant Discharge Elimination System permit requirements. The parties have settled this matter. In October 1994, the company and eight other companies were served with a Summons and Complaint by the Town of Wallkill, New York (the Town) in the United States District Court for the Southern District of New York. The Town seeks to recover an unspecified amount representing response costs resulting from the release or threatened release of hazardous substances at the Town's Landfill, and damages and restitution under common law theories for other costs associated with environmental conditions at the Town's Landfill. The Town also seeks a declaratory judgement under CERCLA that the Defendants are strictly, jointly and severally liable for future necessary response costs. The company notified GTE Corp. of this action since any potential liability for this matter has been retained by GTE Corp. pursuant to an Asset Purchase Agreement dated May 18, 1993. GTE Corp. has assumed the company's defense in this action. Item 6. Reports on Form 8-K ------------------- (b) The Company filed on Form 8-K dated July 5, 1994, under Item 5 "Other Events" and Item 7 "Financial Statements and Exhibits", the audited financial statements for Contel of New York for each of the two years ended December 31, 1993. The Company filed on Form 8-K dated July 5, 1994, under Item 5 "Other Events", a Third Supplemental Indenture, supplemental to the Indenture dated as of August 15, 1991 between the Company and Chemical Bank (Trustee). The Company filed on Form 8-K dated July 15, 1994, under Item 2 "Acquisition of Assets", Item 5 "Other Events", and Item 7 "Financial Statements and Exhibits", a press release announcing the transfer of the GTE Telephone Property in New York State to the Company. The Company filed on Form 8-K dated August 9, 1994, under Item 5 "Other Events" and Item 7 "Financial Statements and Exhibits", the financial statements for Contel of New York for the quarterly period ended March 31, 1994, Pro Forma financial statements as of and for the twelve month period ended March 31, 1994 combining the company and certain of the GTE Telephone Properties; and a press release announcing second quarter earnings for the company. -10- 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 November 14, 1994 By:/s/ Livingston E. Ross ------------------------ ------------------------- Vice President and Controller -11- EX-27 2
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