SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): May 3, 2005
CITIZENS COMMUNICATIONS COMPANY
(Exact name of registrant as specified in its charter)
Delaware 001-11001 06-0619596
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
3 High Ridge Park
Stamford, Connecticut 06905
(Address of Principal Executive Offices)
(203) 614-5600
(Registrant's Telephone Number, Including Area Code)
No Change Since Last Report
---------------------------
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligations of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
ITEM 2.02 Results of Operations and Financial Condition
---------------------------------------------
On May 3, 2005, Citizens Communications Company, issued a press
release. A copy of the press release is attached hereto as
Exhibit 99.1.
The information in this Form 8-K and the Exhibits attached hereto
shall not be deemed "filed" for purposes of Section 18 of the
Securities and Exchange Act of 1934 (the "Exchange Act") or
otherwise subject to the liabilities of that section, nor shall
it be deemed incorporated by reference in any filing under the
Securities Act of 1933 or the Exchange Act, except as expressly
set forth by specific reference in such a filing.
ITEM 9.01 Financial Statements and Exhibits
---------------------------------
(c) Exhibits
99.1 Press release of Citizens Communications Company released
May 3, 2005 announcing 2005 1st Quarter Results.
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 COMMUNICATIONS COMPANY
(Registrant)
By: /s/ Jerry Elliott
--------------------------
Jerry Elliott
Executive Vice President and
Chief Financial Officer
Date: May 3, 2005
Exhibit 99.1
Citizens Communications
3 High Ridge Park
Stamford, CT 06905
203.614.5600
Web site: www.czn.net
-------------------------------------------------------------------------------
Contacts:
Brigid M. Smith Michael A. Zarrella
Assistant Vice President Vice President
Corporate Communications Corporate Development
203.614.5042 203.614.5179
bsmith@czn.com mzarrell@czn.com
Citizens Communications Reports
2005 First-Quarter Results
Stamford, Conn., May 3, 2005 -- Citizens Communications (NYSE:CZN) today
reported first quarter 2005 consolidated revenues of $537.2 million;
consolidated operating income of $145.1 million; and consolidated net income of
$42.6 million. Consolidated net income includes $2.2 million, net of taxes, from
our conferencing service business, which was sold in March 2005 and is therefore
treated as a discontinued operation.
First-quarter 2005 revenue from the company's ILEC operations was $499.2
million, a decrease from $502.8 million in the first quarter of 2004. The
decrease was due primarily to loss of access lines, lower access service
revenues and reduced long-distance revenue. Strong growth in data and enhanced
service revenues offset most of the decreases. Data service revenues increased
21.9 percent compared to the first quarter of 2004.
The company's revenue generating units (which consist of access lines and
High-Speed Internet subscribers) increased 1 percent from a year ago as the
company added a record 30,500 High-Speed Internet customers during the quarter
and had 242,800 High-Speed data subscribers at March 31, 2005. The number of the
company's High-Speed Internet subscribers has increased by more than 100,000 or
71 percent from a year ago. The company's access line count decreased 22,300
lines during the quarter.
ILEC operating income for the first quarter of 2005 was $144.4 million and
operating income margin was 28.9 percent, compared to $136.5 million and 27.1
percent in the first quarter of 2004. Capital expenditures for the ILEC were
$47.3 million for the first quarter of 2005, compared to $52.8 million in the
year ago period.
Free cash flow increased 12.4 percent to $152.9 million during the first quarter
of 2005. The company's quarterly dividend represented a payout of 55.6 percent
of first-quarter 2005 free cash flow. The company expects to continue to pay its
dividend of $0.25 per common share on the last day of each quarter.
-MORE-
The company uses certain non-GAAP financial measures in evaluating its
performance. These include free cash flow. A reconciliation of the differences
between free cash flow and the most comparable financial measure calculated and
presented in accordance with GAAP is included in the tables that follow. The
non- GAAP financial measures are by definition not measures of financial
performance under generally accepted accounting principles and are not
alternatives to operating income or net income reflected in the statement of
operations or to cash flow as reflected in the statement of cash flows and are
not necessarily indicative of cash available to fund all cash flow needs. The
non-GAAP financial measures used by the company may not be comparable to
similarly titled measures of other companies.
The company believes that presentation of non-GAAP financial measures provides
useful information to investors regarding the company's financial condition and
results of operations because these measures, when used in conjunction with
related GAAP financial measures, (i) together provide a more comprehensive view
of the company's core operations and ability to generate cash flow, (ii) provide
investors with the financial analytical framework upon which management bases
financial, operational, compensation and planning decisions and (iii) presents
measurements that investors and rating agencies have indicated to management are
useful to them in assessing the company and its results of operations.
Management uses these non-GAAP financial measures to plan and measure the
performance of its core operations and its divisions measure performance and
report to management based upon these measures. In addition, the company
believes that free cash flow, as the company defines it, can assist in comparing
performance from period to period, without taking into account factors affecting
cash flow reflected in the statement of cash flows, including changes in working
capital and the timing of purchases and payments.
Management uses these non-GAAP financial measures to (i) assist in analyzing the
company's underlying financial performance from period to period, (ii) evaluate
the financial performance of its business units, (iii) analyze and evaluate
strategic and operational decisions, (iv) establish criteria for compensation
decisions; and (v) assist management in understanding the company's ability to
generate cash flow and, as a result, to plan for future capital and operational
decisions. Management uses these non-GAAP financial measures in conjunction with
related GAAP financial measures. The company believes that the non-GAAP
financial measures are meaningful and useful for the reasons outlined above.
While the company utilizes these non-GAAP financial measures in managing and
analyzing its business and financial condition and believes they are useful to
management and to investors for the reasons described above, these non-GAAP
financial measures have certain shortcomings. In particular, free cash flow does
not represent the residual cash flow available for discretionary expenditures,
since items such as debt repayments and dividends are not deducted from such
measure. Management compensates for the shortcomings of these measures by
utilizing them in conjunction with their comparable GAAP financial measures. The
information in this press release should be read in conjunction with the
financial statements and footnotes contained in our documents to be filed with
the U.S. Securities and Exchange Commission.
-MORE-
About Citizens Communications
More information about Citizens can be found at www.czn.net.
This document contains forward-looking statements that are subject to risks and
uncertainties that could cause actual results to differ materially from those
expressed or implied in the statements. These and all forward-looking statements
(including oral representations) are only predictions or statements of current
plans that are constantly under review by the company. All forward-looking
statements may differ from actual results. The foregoing information should be
read in conjunction with the company's filings with the U.S. Securities and
Exchange Commission including, but not limited to, reports on Forms 10-K and
10-Q. The company does not intend to update or revise these forward-looking
statements to reflect the occurrence of future events or circumstances.
###
TABLES TO FOLLOW
Citizens Communications Company
Consolidated Financial Data (1)
(unaudited)
For the quarter ended
-----------------------------------------------------
March 31, March 31, %
(Amounts in thousands - except per-share amounts) 2005 2004 Change
--------------- --------------- ----------------
Income Statement Data (2)
Continuing operations
Revenue $ 537,223 $ 552,311 -3%
Cost of services (exclusive of depreciation and amortization) 51,018 55,550 -8%
Other operating expenses 199,183 208,229 -4%
Management succession and strategic alternatives expenses - 4,382 -100%
Stock based compensation 2,265 3,189 -29%
Depreciation and amortization 139,645 143,363 -3%
Operating income 145,112 137,598 5%
Investment and other income, net 4,773 25,295 -81%
Interest expense (includes dividends on preferred securities) 83,785 97,781 -14%
Income tax expense 25,673 23,705 8%
Income from discontinued operations, net of tax 2,207 1,461 51%
Net income attributable to common shareholders 42,634 42,868 -1%
Weighted average shares outstanding 338,450 283,990 19%
Basic net income per share attributable to common shareholders (3) $ 0.13 $ 0.15 -13%
Other Financial Data
Capital expenditures 52,183 54,539 -4%
Free cash flow (4) 152,913 135,985 12%
(1) Our conferencing business was sold on March 15, 2005. Prior periods have
been restated to present our conferencing business as discontinued
operations.
(2) Our Vermont distribution facilities were sold on April 1, 2004. This sale
affects the comparability of data presented.
(3) Calculated based on weighted average shares outstanding.
(4) A reconciliation to the most comparable GAAP measure is presented at the
end of these tables.
Citizens Communications Company
Financial and Operating Data (1)
(unaudited)
For the quarter ended
----------------------------------------------
March 31, March 31, %
(Dollars in thousands, except operating data) 2005 2004 Change
--------------- -------------- ---------
TELECOMMUNICATIONS
Select Income Statement Data
Revenue
Access services $ 157,322 $ 161,483 -3%
Local services 209,986 212,742 -1%
Long distance services 43,750 47,331 -8%
Data services 38,609 31,674 22%
Directory services 27,963 27,474 2%
Other 21,613 22,107 -2%
ILEC revenue 499,243 502,811 -1%
Electric Lightwave 37,980 39,765 -4%
Total revenue 537,223 542,576 -1%
Expenses
Network access expense 51,018 50,027 2%
Other operating expenses 199,183 202,715 -2%
Management succession and strategic alternatives expenses - 4,382 -100%
Stock based compensation 2,265 3,189 -29%
Depreciation and amortization 139,645 143,363 -3%
Total expenses 392,111 403,676 -3%
Operating Income
ILEC $ 144,440 $ 136,510 6%
ELI 672 2,390 -72%
Other Financial and Operating Data
ILEC capital expenditures $ 47,325 $ 52,777 -10%
ELI capital expenditures 4,801 1,762 172%
ILEC depreciation and amortization 133,366 137,528 -3%
ELI depreciation and amortization 6,279 5,835 8%
ILEC access lines 2,298,510 2,375,629 -3%
High-speed internet subscribers 242,768 141,942 71%
ILEC switched access minutes of use (in millions) 2,882 3,000 -4%
ILEC average monthly revenue per average RGU (2) $ 65.59 $ 66.72 -2%
(1) See footnote (1) on the first page.
(2) RGU's are access lines plus high-speed internet subscribers.
Citizens Communications Company
Financial and Operating Data
(unaudited)
For the quarter ended
---------------------------------------------
March 31, March 31, %
(Dollars in thousands) 2005 2004 Change
--------------- ----------- ------------
GAS AND ELECTRIC SECTORS (1)
Select Income Statement Data
Revenue $ - $ 9,735 -100%
Gas, electric energy and fuel oil purchased - 5,523 -100%
Other operating expenses - 5,514 -100%
Operating (loss) - (1,302) -100%
(1) See footnote (2) on the first page.
Citizens Communications Company
Condensed Consolidated Balance Sheet Data (1)
(unaudited)
(Dollars in thousands) March 31, 2005 December 31, 2004
------------------- -------------------
ASSETS
------
Current assets:
Cash and cash equivalents $ 284,220 $ 167,463
Accounts receivable and other current assets 245,822 279,295
Assets of discontinued operations - 24,122
------------------- -------------------
Total current assets 530,042 470,880
Property, plant and equipment, net 3,279,957 3,335,850
Other long-term assets 2,812,023 2,861,689
------------------- -------------------
Total assets $ 6,622,022 $ 6,668,419
=================== ===================
LIABILITIES AND EQUITY
----------------------
Current liabilities:
Long-term debt due within one year $ 6,362 $ 6,380
Accounts payable and other current liabilities 382,969 410,405
Liabilities of discontinued operations - 735
------------------- -------------------
Total current liabilities 389,331 417,520
Deferred income taxes and other liabilities 652,772 621,661
Long-term debt 4,253,034 4,266,998
Shareholders' equity 1,326,885 1,362,240
------------------- -------------------
Total liabilities and equity $ 6,622,022 $ 6,668,419
=================== ===================
(1)See footnote (1) on the first page.
Citizens Communications Company
Condensed Consolidated Cash Flow Data (1)
(unaudited)
(Dollars in thousands)
For the three months ended March 31,
---------------------------------------
2005 2004
----------------- --------------------
Income from continuing operations $ 40,427 $ 41,407
Adjustments to reconcile income from continuing operations to
net cash provided by continuing operating activities:
Depreciation and amortization expense 139,645 143,363
Gain on expiration/settlement of customer advances (80) (24,182)
Stock based compensation 2,265 3,189
Other 22,646 41,649
----------------- --------------------
Net cash provided by continuing operating activities 204,903 205,426
Cash flows from investing activities:
Proceeds from sales of assets, net of selling expenses 1,112 -
Capital expenditures (52,183) (54,539)
Other assets (purchased) distributions received, net 247 -
----------------- --------------------
Net cash used in investing activities (50,824) (54,539)
Cash flows from financing activities:
Debt issuance costs (385) -
Long-term debt payments (307) (93,557)
Issuance of common stock 5,552 7,682
Dividends paid (85,081) -
Other (1,237) (1,775)
----------------- --------------------
Net cash used in financing activities (81,458) (87,650)
Cash provided by discontinued operations 44,136 1,104
Increase in cash and cash equivalents 116,757 64,341
Cash and cash equivalents at January 1, 167,463 583,671
----------------- --------------------
Cash and cash equivalents at March 31, $ 284,220 $ 648,012
================= ====================
Cash paid (refunded) during the period for:
Interest $ 71,336 $ 97,515
Income taxes $ (1,859) $ 227
(1) See footnote (1) on the first page.
Schedule A
Reconciliation of Non-GAAP Financial Measures (1)
For the quarter ended March 31,
---------------------------------------------
(Dollars in thousands) 2005 2004
------------------- ------------------
Net Income from Continuing Operations to Free Cash Flow ;
---------------------------------------------------------
Net Cash Provided by Continuing Operating Activities
----------------------------------------------------
Net income from continuing operations $ 40,427 $ 41,407
Add back:
Depreciation and amortization 139,645 143,363
Income tax expense 25,673 23,705
Management succession and strategic alternatives expenses - 4,382
Stock based compensation 2,265 3,189
Subtract:
Cash paid (refunded) for income taxes (1,859) 227
Investment and other income, net 4,773 25,295
Capital expenditures 52,183 54,539
------------------- ------------------
Free cash flow 152,913 135,985
Add back:
Deferred income taxes 25,109 20,991
Noncash (gains)/losses, net 1,855 (17,136)
Investment and other income, net 4,773 25,295
Cash paid (refunded) for income taxes (1,859) 227
Capital expenditures 52,183 54,539
Subtract:
Changes in current assets and liabilities 2,133 (16,801)
Income tax expense 25,673 23,705
Management succession and strategic alternatives expenses - 4,382
Stock based compensation 2,265 3,189
------------------- ------------------
Net cash provided by continuing operating activities $ 204,903 $ 205,426
=================== ==================
(1) See footnote (1) on the first page.