UNITED STATES
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): February 24, 2006
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 February 24, 2006, 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
February 24, 2006 announcing 2005 4th 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
President and Acting
Chief Financial Officer
Date: February 24, 2006
Exhibit 99.1
Citizens Communications
3 High Ridge Park
Stamford, CT 06905
203.614.5600
Web site: www.czn.net
-------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE:
Contact:
Michael Bromley
203.614.5218
mbromley@czn.com
Citizens Communications Reports 2005 Fourth-Quarter Results;
Announces New Stock Buyback and Debt Retirement Programs;
Declares Quarterly Dividend
Stamford, Conn., February 24, 2006 -- Citizens Communications (NYSE:CZN) today
reported fourth quarter 2005 revenues of $556.1 million; operating income of
$173.2 million; and net income of $76.8 million.
Fourth quarter 2005 revenue from the company's Frontier operations increased 2.7
percent to $513.7 million from $500.4 million in the fourth quarter of 2004. The
increase is due primarily to growth in data and enhanced service revenues and
higher access service revenues (which includes subsidy payments we receive from
federal and state agencies). Data service revenues increased 30.3 percent
compared to the fourth quarter of 2004 and high margin enhanced service revenues
increased 3.0 percent from the fourth quarter of 2004. During the fourth quarter
of 2005, we recognized approximately $10.0 million of additional Universal
Service Fund (USF) subsidy revenue because of a missed filing deadline with the
USF during the third quarter of 2005.
The company added 21,200 high-speed internet customers during the quarter and
had 311,400 high-speed data subscribers at December 31, 2005. The number of the
company's high-speed internet subscribers has increased by more than 99,000 or
46.7 percent from a year ago.
Frontier operating income for the fourth quarter of 2005 was $165.0 million and
operating income margin was 32.1 percent, compared to $138.0 million and 27.6
percent in the fourth quarter of 2004. Capital expenditures for the Frontier
operations were $90.0 million for the fourth quarter of 2005.
Free cash flow was $123.9 million during the fourth quarter and increased 9.2
percent to $545.2 million for the full year. The company's dividend represents a
payout of 62.1 percent of 2005 free cash flow.
During the fourth quarter, the company bought 6,119,000 shares of its common
stock at a total cost of $78.0 million and completed its $250.0 million
authorized share repurchase program. Under this program, the company repurchased
a total of 18,775,000 shares of common stock.
--MORE --
The company's Board of Directors has authorized new share repurchase and debt
retirement programs. Under the new programs, up to $300.0 million of common
stock may be repurchased over the next 12 months and up to $150.0 million of
debt may be retired prior to maturity over the next 12 months. The new stock
repurchase program, in combination with the 2005 program, will result in the
retirement of almost 13 percent of the company's common stock. The new debt
retirement program is in addition to the previously announced repayment of
$228.0 million of debt that matures in 2006 and $49.0 million of debt that will
be repaid in 2007. The combination of the previously announced debt repayments
and the new debt retirement program total $427.0 million of debt that may be
repaid during 2006 and 2007 and will result in a reduction of 11 percent of the
company's debt.
The company expects to receive approximately $64.6 million in cash upon the
liquidation of the Rural Telephone Bank during the second quarter of 2006. In
addition, the previously announced sale of Electric Lightwave, LLC (ELI) for
$247.0 million (including $243.0 million in cash) is expected to close during
the third quarter of 2006.
The company expects to produce during 2006 between $500.0 million and $525.0
million of free cash flow assuming that the sale of ELI closes during the third
quarter of 2006. This estimate of free cash flow does not take into account the
effect of the new debt retirement program announced today.
The company's next regular quarterly cash dividend of $0.25 per share will be
paid on March 31, 2006 to shareholders of record on March 9, 2006. The company
expects that dividends paid to stockholders in 2006 will be treated as dividends
for federal income tax purposes. Shareholders are encouraged to consult with
their tax advisors.
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.
--MORE --
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.
About Citizens Communications
More information about Citizens can be found at www.czn.net.
This press release contains forward-looking statements that are made pursuant to
the safe harbor provisions of The Private Securities Litigation Reform Act of
1995. These statements are made on the basis of management's views and
assumptions regarding future events and business performance. Words such as
"believe," "anticipate," "expect" and similar expressions are intended to
identify forward-looking statements. Forward-looking statements (including oral
representations) involve risks and uncertainties that may cause actual results
to differ materially from any future results, performance or achievements
expressed or implied by such statements. These risks and uncertainties are based
on a number of factors, including but not limited to: our ability to effectively
manage our operations, costs and capital spending; our ability to successfully
introduce new product offerings, including bundled service packages; our ability
to sell enhanced services; our ability to comply with federal and state
regulations; changes in the number of our revenue generating units; general and
local economic and employment conditions; the effects of ongoing changes in the
regulation of the communications industry; overall changes in the
telecommunications market; and greater than anticipated competition from
wireless or wireline carriers. In addition, we may be unable to implement some
of our current business initiatives if we fail to recognize the benefits we
expect to receive from certain transactions, including but not limited to, the
anticipated sale of ELI and the liquidation of Rural Telephone Bank. These and
other uncertainties related to our business are described in greater detail in
our filings with the Securities and Exchange Commission, including our reports
on Forms 10-K and 10-Q. We undertake no obligation to publicly update or revise
any forward-looking statement or to make any other forward-looking statements,
whether as a result of new information, future events or otherwise unless
required to do so by securities laws.
###
TABLES TO FOLLOW
Citizens Communications Company
Consolidated Financial Data (1)
(unaudited)
For the quarter ended For the year ended
December 31, % December 31, %
----------------------- ---------------------------
(Amounts in thousands - except per-share amounts) 2005 2004 Change 2005 2004 Change
---------------------------------- -------------------------------------
Income Statement Data (2)
Revenue (3) $ 556,112 $ 539,127 3% $2,162,479 $2,168,422 0%
Cost of services (exclusive of depreciation and
amortization) 49,725 47,023 6% 195,491 198,938 -2%
Other operating expenses 201,201 203,877 -1% 809,753 820,976 -1%
Management succession and strategic alternatives
expenses (4) - - - - 90,632 -100%
Stock based compensation 1,994 3,204 -38% 8,427 10,963 -23%
Depreciation and amortization 129,969 142,617 -9% 541,959 570,808 -5%
Operating income 173,223 142,406 22% 606,849 476,105 27%
Investment and other income (loss) 3,813 (36,592) 110% 16,562 (19,743) 184%
Interest expense (includes interest on convertible
debt) 85,807 92,725 -7% 338,903 379,021 -11%
Income tax expense (benefit) 14,448 (2,447) 690% 84,340 10,422 709%
Income from discontinued operations, net of tax - 1,244 -100% 2,207 5,231 -58%
Net income attributable to common shareholders 76,781 16,780 358% 202,375 72,150 180%
Weighted average shares outstanding 331,180 335,143 -1% 337,065 303,989 11%
Basic net income per share attributable to common
shareholders (5) $ 0.23 $ 0.05 360% $ 0.60 $ 0.24 150%
Other Financial Data
Total capital expenditures $ 92,999 $ 75,024 24% $ 268,459 $ 275,204 -2%
Free cash flow (6) 123,904 127,575 -3% 545,162 499,184 9%
(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) Revenue for the year ended December 31, 2004 includes $9,735 of revenue
from electric operations sold.
(4) Includes $36,618 related to stock based compensation expense for the twelve
months ended December 31, 2004.
(5) Calculated based on weighted average shares outstanding.
(6) 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 year ended
December 31, % December 31, %
--------------------------- --------------------------
(Dollars in thousands, except operating data) 2005 2004 Change 2005 2004 Change
-------------------------------------- ------------------------------------
TELECOMMUNICATIONS
Select Income Statement Data
Revenue
Access services $ 168,529 $ 159,797 5% $ 623,918 $ 634,196 -2%
Local services 205,434 210,719 -3% 829,801 851,177 -3%
Long distance services 40,405 44,657 -10% 169,496 183,623 -8%
Data and internet services 48,220 37,020 30% 175,026 138,231 27%
Directory services 28,226 27,636 2% 113,092 110,623 2%
Other 22,914 20,545 12% 91,985 84,807 8%
ILEC revenue 513,728 500,374 3% 2,003,318 2,002,657 0%
Electric Lightwave 42,384 38,753 9% 159,161 156,030 2%
Total revenue 556,112 539,127 3% 2,162,479 2,158,687 0%
Expenses
Network access expense 49,725 47,023 6% 195,491 193,415 1%
Other operating expenses 201,201 203,075 -1% 809,753 813,630 0%
Management succession and strategic alternatives
expenses - - - - 90,632 -100%
Stock based compensation 1,994 3,204 -38% 8,427 10,963 -23%
Depreciation and amortization 129,969 142,617 -9% 541,959 570,808 -5%
Total expenses 382,889 395,919 -3% 1,555,630 1,679,448 -7%
Operating Income
ILEC $ 164,954 $ 137,979 20% $ 588,543 $ 468,889 26%
ELI 8,269 5,229 58% 18,306 10,350 77%
Other Financial and Operating Data
ILEC capital expenditures $ 89,987 $ 71,259 26% $ 252,213 $ 263,193 -4%
ELI capital expenditures 2,965 3,578 -17% 16,099 11,644 38%
ILEC depreciation and amortization 123,790 136,457 -9% 516,982 546,747 -5%
ELI depreciation and amortization 6,179 6,160 0% 24,977 24,061 4%
ILEC access lines 2,218,570 2,320,772 -4% 2,218,570 2,320,772 -4%
High-speed internet subscribers 311,416 212,277 47% 311,416 212,277 47%
ILEC switched access minutes of use (in millions) 2,705 2,895 -7% 11,225 11,785 -5%
ILEC average monthly revenue per average RGU (2) $ 67.60 $ 65.85 3% $ 65.93 $ 66.23 0%
(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 year ended
December 31, % December 31, %
------------------------------ -------------------------------
(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 - 802 -100% - 7,346 -100%
Operating income (loss) - (802) 100% - (3,134) 100%
(1) See footnote (2) on the first page.
Citizens Communications Company
Condensed Consolidated Balance Sheet Data (1)
(Amounts in thousands)
December 31, 2005 December 31, 2004
--------------------- --------------------
ASSETS
------
Current assets:
Cash and cash equivalents $ 265,775 $ 163,759
Accounts receivable and other current assets 276,320 282,999
Assets of discontinued operations - 24,122
--------------------- --------------------
Total current assets 542,095 470,880
Property, plant and equipment, net 3,186,465 3,335,850
Other long-term assets 2,683,549 2,861,689
--------------------- --------------------
Total assets $ 6,412,109 $ 6,668,419
===================== ====================
LIABILITIES AND EQUITY
----------------------
Current liabilities:
Long-term debt due within one year $ 227,734 $ 6,380
Accounts payable and other current liabilities 388,908 410,405
Liabilities of discontinued operations - 735
--------------------- --------------------
Total current liabilities 616,642 417,520
Deferred income taxes and other liabilities 754,282 621,661
Long-term debt 3,999,376 4,266,998
Shareholders' equity 1,041,809 1,362,240
--------------------- --------------------
Total liabilities and equity $ 6,412,109 $ 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 year ended December 31,
-------------------------------------
2005 2004
----------------- ----------------
Cash flows provided by (used in) operating activities:
Net income $ 202,375 $ 72,150
Deduct: Gain on sale of discontinued operations (1,167) -
Income from discontinued operations (1,040) (5,231)
Adjustments to reconcile income to net cash provided by
operating activities:
Depreciation and amortization 541,959 570,808
Gain on expiration/settlement of customer advances (681) (25,345)
Loss on debt exchange 3,175 -
Stock based compensation 8,427 47,581
Other 91,169 51,474
--------------- ---------------
Net cash provided by operating activities 844,217 711,437
Cash flows from investing activities:
Proceeds from sales of assets, net of selling expenses 24,195 30,959
Proceeds from sale of discontinued operations 43,565 -
Securities sold 1,112 26,514
Capital expenditures (268,459) (275,204)
Other assets (purchased) distributions received, net 5,724 (28,110)
--------------- ---------------
Net cash used by investing activities (193,863) (245,841)
Cash flows from financing activities:
Long-term debt borrowings - 700,000
Debt issuance costs - (15,502)
Long-term debt payments (6,433) (1,214,018)
Premiums paid to retire debt - (66,480)
Issuance of common stock 47,550 544,562
Dividends paid (338,364) (832,768)
Shares repurchased (250,000) -
Other (1,662) (2,089)
--------------- ---------------
Net cash used by financing activities (548,909) (886,295)
Cash flows of discontinued operations
Operating cash flows 578 1,361
Investing cash flows (7) (571)
Financing cash flows - (3)
--------------- ---------------
571 787
Increase (decrease) in cash and cash equivalents 102,016 (419,912)
Cash and cash equivalents at January 1, 163,759 583,671
--------------- ---------------
Cash and cash equivalents at December 31, $ 265,775 $ 163,759
=============== ===============
Cash paid during the period for:
Interest $ 318,638 $ 370,128
Income taxes (refunds) $ 4,711 $ (4,901)
(1) See footnote (1) on the first page.
Schedule A
Reconciliation of Non-GAAP Financial Measures (1)
(unaudited)
For the quarter ended December 31, For the year ended December 31,
------------------------------------------------------------------------
(Amounts in thousands) 2005 2004 2005 2004
---------------- ---------------- ---------------- ---------------
Net Income to Free Cash Flow; Net Cash Provided by
--------------------------------------------------
Operating Activities
--------------------
Net income $ 76,781 $ 16,780 $ 202,375 $ 72,150
Add back:
Depreciation and amortization 129,969 142,617 541,959 570,808
Income tax expense (benefit) 14,448 (2,447) 84,340 10,422
Management succession and strategic alternatives
expenses - - - 90,632
Stock based compensation 1,994 3,204 8,427 10,963
Subtract:
Cash paid (refunded) for income taxes 2,476 (7,097) 4,711 (4,901)
Gain on sale of discontinued operations - - 1,040 -
Income from discontinued operations - 1,244 1,167 5,231
Investment and other income (loss) 3,813 (36,592) 16,562 (19,743)
Capital expenditures 92,999 75,024 268,459 275,204
-------------- --------------- -------------- ---------------
Free cash flow 123,904 127,575 545,162 499,184
Add back:
Deferred income taxes 44,405 8,893 100,636 24,016
Non-cash (gains)/losses, net 14,439 64,413 30,910 108,992
Investment and other income (loss) 3,813 (36,592) 16,562 (19,743)
Cash paid (refunded) for income taxes 2,476 (7,097) 4,711 (4,901)
Capital expenditures 92,999 75,024 268,459 275,204
Subtract:
Changes in current assets and liabilities 25,722 56,920 29,456 59,298
Income tax expense (benefit) 14,448 (2,447) 84,340 10,422
Management succession and strategic alternatives
expenses - - - 90,632
Stock based compensation 1,994 3,204 8,427 10,963
-------------- --------------- -------------- ---------------
Net cash provided by operating activities $ 239,872 $ 174,539 $ 844,217 $ 711,437
============== =============== ============== ===============
(1) See footnote (1) on the first page.