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): July 29, 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 July 29, 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
July 29, 2005 announcing 2005 2nd 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: July 29, 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 Second-Quarter Results; Declares Quarterly Dividend
Stamford, Conn., July 29, 2005 -- Citizens Communications (NYSE:CZN) today
reported second quarter 2005 consolidated revenues of $531.8 million;
consolidated operating income of $146.9 million; and consolidated net income of
$44.6 million.
Second quarter 2005 revenue from the company's ILEC operations was $492.8
million, a decrease from $499.5 million in the second quarter of 2004. The
decrease is due primarily to a reserve for state earnings limitations, fewer
access lines, lower access service revenues and reduced long distance revenue.
Growth in data and enhanced service revenues partially offset the decreases.
Data service revenues increased 26.1 percent compared to the second quarter of
2004.
The company's revenue generating units (which consists of access lines and high
speed internet subscribers) increased almost 1% from a year ago as the company
added 24,500 high speed internet customers during the quarter and had 267,300
high speed data subscribers at June 30, 2005. The number of the company's high
speed internet subscribers has increased by more than 103,000 or 63% from a year
ago. The company's access line count decreased 23,000 lines during the quarter.
ILEC operating income for the second quarter of 2005 was $142.1 million and
operating income margin was 28.8 percent, compared to $125.1 million and 25.0
percent in the second quarter of 2004. Capital expenditures for the ILEC were
$57.0 million for the second quarter of 2005.
Free cash flow increased 30 percent to $138.1 million during the second quarter
of 2005. The company's dividend represents a payout of 58.8 percent of free cash
flow for the first six months of 2005.
During the second quarter, the company repurchased $18.6 million of stock at an
average price of $13.28 per share and exchanged $50 million of debt due in 2006
for debt that matures in 2031.
The company's next regular quarterly cash dividend of $0.25 per share will be
paid on September 30, 2005 to shareholders of record on September 9, 2005.
--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 For the six months ended
June 30, % June 30, %
------------------------- -----------------------
(Amounts in thousands - except per-share amounts) 2005 2004 Change 2005 2004 Change
------------------------------------- ----------------------------------
Income Statement Data (2)
Revenue $ 531,798 $ 537,796 -1% $1,069,021 $ 1,090,107 -2%
Cost of services (exclusive of depreciation and
amortization) 43,698 46,710 -6% 94,716 102,260 -7%
Other operating expenses 201,069 208,032 -3% 400,252 416,261 -4%
Management succession and strategic alternatives
expenses - 10,392 -100% - 14,774 -100%
Stock based compensation 2,116 2,728 -22% 4,381 5,917 -26%
Depreciation and amortization 138,018 143,920 -4% 277,663 287,283 -3%
Operating income 146,897 126,014 17% 292,009 263,612 11%
Investment and other income 1,208 5,208 -77% 5,981 30,503 -80%
Interest expense (includes interest on convertible
debt) 84,083 97,652 -14% 167,868 195,433 -14%
Income tax expense 19,438 11,098 75% 45,111 34,803 30%
Income from discontinued operations, net of tax - 1,320 -100% 2,207 2,781 -21%
Net income attributable to common shareholders 44,584 23,792 87% 87,218 66,660 31%
Weighted average shares outstanding 340,389 284,782 20% 339,484 284,378 19%
Basic net income per share attributable to common
shareholders (3) $ 0.13 $ 0.08 63% $ 0.26 $ 0.23 13%
Other Financial Data
Total capital expenditures $ 62,120 $ 78,103 -20% $ 114,303 $ 132,642 -14%
Free cash flow (4) 138,131 106,400 30% 291,044 242,385 20%
(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 For the six months ended
June 30, % June 30, %
--------------------------- --------------------------
(Dollars in thousands, except operating data) 2005 2004 Change 2005 2004 Change
-------------------------------------- ------------------------------------
TELECOMMUNICATIONS
Select Income Statement Data
Revenue
Access services $ 152,152 $ 155,224 -2% $ 309,474 $ 316,707 -2%
Local services 205,751 213,417 -4% 415,737 426,159 -2%
Long distance services 42,337 45,546 -7% 86,088 92,877 -7%
Data services 42,392 33,624 26% 81,000 65,298 24%
Directory services 28,541 28,201 1% 56,504 55,675 1%
Other 21,598 23,482 -8% 43,211 45,589 -5%
ILEC revenue 492,771 499,494 -1% 992,014 1,002,305 -1%
Electric Lightwave 39,027 38,302 2% 77,007 78,067 -1%
Total revenue 531,798 537,796 -1% 1,069,021 1,080,372 -1%
Expenses
Network access expense 43,698 46,710 -6% 94,716 96,737 -2%
Other operating expenses 201,069 207,013 -3% 400,252 409,728 -2%
Management succession and strategic alternatives
expenses - 10,392 -100% - 14,774 -100%
Stock based compensation 2,116 2,728 -22% 4,381 5,917 -26%
Depreciation and amortization 138,018 143,920 -4% 277,663 287,283 -3%
Total expenses 384,901 410,763 -6% 777,012 814,439 -5%
Operating Income
ILEC $ 142,135 $ 125,076 14% $ 286,575 $ 261,586 10%
ELI 4,762 1,957 143% 5,434 4,347 25%
Other Financial and Operating Data
ILEC capital expenditures $ 57,013 $ 73,535 -22% $ 104,338 $ 126,312 -17%
ELI capital expenditures 5,089 4,397 16% 9,890 6,159 61%
ILEC depreciation and amortization 131,711 137,975 -5% 265,077 275,503 -4%
ELI depreciation and amortization 6,307 5,945 6% 12,586 11,780 7%
ILEC access lines 2,275,465 2,362,285 -4% 2,275,465 2,362,285 -4%
High-speed internet subscribers 267,270 164,184 63% 267,270 164,184 63%
ILEC switched access minutes of use (in millions) 2,830 2,917 -3% 5,712 5,917 -3%
ILEC average monthly revenue per average RGU (2) $ 64.62 $ 66.02 -2% $ 65.14 $ 66.37 -2%
(1) See footnote (1) on the first page.
(2) RGUs are access lines plus high-speed internet subscribers.
Citizens Communications Company
Financial and Operating Data
(unaudited)
For the quarter ended For the six months ended
June 30, % June 30, %
------------------------------ -------------------------------
(Dollars in thousands) 2005 2004 Change 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 - 1,019 -100% - 6,533 -100%
Operating income (loss) - (1,019) -100% - (2,321) -100%
(1) See footnote (2) on the first page.
Citizens Communications Company
Condensed Consolidated Balance Sheet Data (1)
(Amounts in thousands)
(unaudited)
June 30, 2005 December 31, 2004
--------------------- --------------------
ASSETS
------
Current assets:
Cash and cash equivalents $ 368,772 $ 167,463
Accounts receivable and other current assets 246,432 279,295
Assets of discontinued operations - 24,122
--------------------- -------------------
Total current assets 615,204 470,880
Property, plant and equipment, net 3,234,734 3,335,850
Other long-term assets 2,771,359 2,861,689
--------------------- -------------------
Total assets $ 6,621,297 $ 6,668,419
===================== ===================
LIABILITIES AND EQUITY
----------------------
Current liabilities:
Long-term debt due within one year $ 175,973 $ 6,380
Accounts payable and other current liabilities 382,968 410,405
Liabilities of discontinued operations - 735
--------------------- -------------------
Total current liabilities 558,941 417,520
Deferred income taxes and other liabilities 673,454 621,661
Long-term debt 4,070,712 4,266,998
Shareholders' equity 1,318,190 1,362,240
--------------------- -------------------
Total liabilities and equity $ 6,621,297 $ 6,668,419
===================== ===================
(1) See footnote (1) on the first page.
Citizens Communications Company
Condensed Consolidated Cash Flow Data (1)
(unaudited)
(Amounts in thousands)
For the six months ended June 30,
------------------------------------
2005 2004
----------------- -----------------
Income from continuing operations $ 85,011 $ 63,879
Adjustments to reconcile income from continuing operations to
net cash provided by continuing operating activities:
Depreciation and amortization 277,663 287,283
Gain on expiration/settlement of customer advances (668) (25,345)
Loss on debt exchange 3,175 -
Stock based compensation 4,381 5,917
Other 46,607 32,486
------------- ---------------
Net cash provided by continuing operating activities 416,169 364,220
Cash flows from investing activities:
Proceeds from sales of assets, net of selling expenses 24,195 13,992
Securities sold 1,112 -
Capital expenditures (114,303) (132,642)
Other assets (purchased) distributions received, net (1,775) -
------------- ---------------
Net cash used by investing activities (90,771) (118,650)
Cash flows from financing activities:
Long-term debt payments (5,924) (99,783)
Issuance of common stock 24,953 13,121
Dividends paid (171,022) -
Shares repurchased (14,587) -
Other (1,645) (1,860)
------------- ---------------
Net cash used by financing activities (168,225) (88,522)
Cash provided (used) by discontinued operations 44,136 (360)
Increase in cash and cash equivalents 201,309 156,688
Cash and cash equivalents at January 1, 167,463 583,671
------------- ---------------
Cash and cash equivalents at June 30, $ 368,772 $ 740,359
============= ===============
Cash paid during the period for:
Interest $ 143,436 $ 204,292
Income taxes $ 838 $ 1,126
(1) See footnote (1) on the first page.
Schedule A
Reconciliation of Non-GAAP Financial Measures (1)
For the quarter ended June 30, For the six months ended June 30,
------------------------------ ---------------------------------
(Amounts in thousands) 2005 2004 2005 2004
--------------- ------------ ---------------- -------------
Net Income from Continuing Operations to Free Cash Flow ;
---------------------------------------------------------
Net Cash Provided by Continuing Operating Activities
----------------------------------------------------
Net income from continuing operations $ 44,584 $ 22,472 $ 85,011 $ 63,879
Add back:
Depreciation and amortization 138,018 143,920 277,663 287,283
Income tax expense 19,438 11,098 45,111 34,803
Management succession and strategic alternatives expenses - 10,392 - 14,774
Stock based compensation 2,116 2,728 4,381 5,917
Subtract:
Cash paid for income taxes 2,697 899 838 1,126
Investment and other income 1,208 5,208 5,981 30,503
Capital expenditures 62,120 78,103 114,303 132,642
----------- ----------- ----------- ----------
Free cash flow 138,131 106,400 291,044 242,385
Add back:
Deferred income taxes 20,892 21,316 46,001 42,307
Non-cash (gains)/losses, net 8,400 11,917 10,255 (5,219)
Investment and other income 1,208 5,208 5,981 30,503
Cash paid for income taxes 2,697 899 838 1,126
Capital expenditures 62,120 78,103 114,303 132,642
Subtract:
Changes in current assets and liabilities 628 40,831 2,761 24,030
Income tax expense 19,438 11,098 45,111 34,803
Management succession and strategic alternatives expenses - 10,392 - 14,774
Stock based compensation 2,116 2,728 4,381 5,917
----------- ----------- ----------- ----------
Net cash provided by continuing operating activities $211,266 $158,794 $416,169 $364,220
=========== =========== =========== ==========
(1) See footnote (1) on the first page.