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 6, 2004
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)
ITEM 12. Disclosure of Results of Operations and Financial Condition
-----------------------------------------------------------
On May 6, 2004, 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.
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
Senior Vice President and Chief Financial Officer
Date: May 6, 2004
Exhibit 99.1
Citizens Communications
3 High Ridge Park
Stamford, CT 06905
203.614.5600
Web site: www.czn.net
--------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE
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
2004 First-Quarter Results
Stamford, Conn., May 6, 2004 -- Citizens Communications (NYSE: CZN) today
reported first-quarter 2004 consolidated revenues of $558.5 million,
consolidated operating income of $139.8 million, and consolidated net income of
$42.9 million. Consolidated operating income reflects $4.6 million of expenses
related to the company's ongoing review of financial and strategic alternatives
and related compensation arrangements. Consolidated net income for the quarter
also includes a pre-tax gain of $24.2 million related to the expiration of
certain liabilities.
First-quarter 2004 revenue from the company's ILEC operations was $509.0
million, compared to $513.6 million in the first quarter of 2003. The decrease
is due primarily to lower access services revenues, reduced long-distance
revenue, loss of access lines and the sale of approximately 11,000 access lines
in North Dakota in April 2003 (which had revenues of $2.1 million during the
first quarter of 2003). These decreases were partially offset by continued
increases in data and enhanced service revenues.
The company added a record 21,500 DSL customers during the quarter and had
almost 142,000 DSL subscribers at March 31, 2004. The company's access line
count, which does not take into account DSL subscriptions, decreased 10,800
lines during the quarter.
ILEC operating income for the first quarter of 2004 was $138.7 million and
operating income margin was 27.3 percent.
Capital expenditures for the ILEC were $52.9 million for the first quarter of
2004.
First quarter 2004 revenue from Electric Lightwave totaled $39.8 million,
operating income was $2.4 million, and capital expenditures were $1.8 million.
--MORE--
The company produced free cash flow of $133.3 million and retired $93.6 million
of debt during the first-quarter 2004 and ended the quarter with $648.0 million
in cash. For the first-quarter 2004 the company reported net cash provided by
operating activities of $207.2 million, net cash used in investing activities of
$55.2 million, and net cash used in financing activities of $87.7 million. On
April 1, 2004, the company closed its final utility sale with the completion of
the sales of its Vermont Electric division. The company has completed its
utility divestiture program, generating a total of $1.9 billion of proceeds,
which exceeds the company's original estimate of $1.8 billion.
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.
--MORE--
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 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 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
(unaudited)
For the quarter ended
----------------------------------------------------
March 31, March 31, %
(Amounts in thousands - except per-share amounts) 2004 2003 Change
--------------- -------------- ----------------
Income Statement Data
Revenue $ 558,468 $ 651,862 -14%
Cost of services (exclusive of depreciation and amortization) 57,064 113,219 -50%
Other operating expenses 214,867 234,422 -8%
Restricted stock based compensation 2,873 1,378 108%
Depreciation and amortization 143,858 138,548 4%
Operating income 139,806 164,295 -15%
Investment and other income, net 25,294 47,919 -47%
Interest expense (includes dividends on preferred securities) 97,782 110,576 -12%
Income tax expense 24,450 39,976 -39%
Cumulative effect of change in accounting principle - 65,769 -100%
Net income attributable to common shareholders 42,868 127,431 -66%
Weighted average shares outstanding 283,990 281,637 1%
Net income attributable to common shareholders (1) $ 0.15 $ 0.45 -67%
Other Financial Data
Total capital expenditures 55,188 47,752 16%
Free cash flow (2) 133,340 145,583 -8%
(1) Calculated based on weighted average shares outstanding.
(2) A reconciliation to the most comparable GAAP measure is presented at the
end of these tables.
Citizens Communications Company
Financial and Operating Data
(unaudited)
For the quarter ended
----------------------------------------------
March 31, March 31, %
(Dollars in thousands, except operating data) 2004 2003 Change
--------------- --------------- ----------
TELECOMMUNICATIONS
Select Income Statement Data
Revenue
Access services $ 161,483 $ 169,171 -5%
Local services 212,742 214,273 -1%
Long distance and data services 79,005 77,683 2%
Directory services 27,474 27,043 2%
Other 28,264 25,439 11%
ILEC revenue 508,968 513,609 -1%
Electric Lightwave 39,765 41,093 -3%
Total revenue 548,733 554,702 -1%
Expenses
Network access expense 51,541 56,515 -9%
Other operating expenses 209,353 210,833 -1%
Restricted stock based compensation 2,873 1,356 112%
Depreciation and amortization 143,858 138,548 4%
Total expenses 407,625 407,252 0%
Operating Income
ILEC $ 138,718 $ 146,915 -6%
ELI 2,390 535 347%
Other Financial and Operating Data
ILEC capital expenditures $ 52,853 $ 37,877 40%
ELI capital expenditures 1,762 1,147 54%
ILEC depreciation and amortization 138,023 132,355 4%
ELI depreciation and amortization 5,835 6,193 -6%
ILEC access lines (1) 2,375,629 2,435,246 -2%
DSL subscribers 141,942 80,353 77%
ILEC switched access minutes of use (in millions) 3,000 3,045 -1%
ILEC average monthly revenue per average line $ 71.25 $ 70.17 2%
(1) On April 1, 2003, we sold approximately 11,000 access lines in the state of
North Dakota. This sale affects the comparability of data presented.
Citizens Communications Company
Financial and Operating Data
(unaudited)
For the quarter ended
---------------------------------------------
March 31, March 31, %
(Dollars in thousands) 2004 2003 Change
--------------- ----------- ------------
GAS AND ELECTRIC SECTORS (1)
Select Income Statement Data
Revenue $ 9,735 $ 97,160 -90%
Gas, electric energy and fuel oil purchased 5,523 56,704 -90%
Other operating expenses 5,514 23,589 -77%
Restricted stock based compensation - 22 -100%
Operating income (loss) (1,302) 16,845 -108%
Other Financial Data
Capital expenditures 573 8,314 -93%
(1) The Gas Company in Hawaii division was sold on August 8, 2003, our Arizona
gas and electric divisions were sold on August 11, 2003 and our Vermont
transmission facilities were sold on December 2, 2003. The sales of these
properties affect the comparability of data presented.
Citizens Communications Company
Condensed Consolidated Balance Sheet Data
(Dollars in thousands) March 31, 2004
(unaudited) December 31, 2003
--------------------- --------------------
ASSETS
------
Current assets:
Cash and cash equivalents $ 648,012 $ 583,671
Accounts receivable and other current assets 260,528 289,457
Assets held for sale 24,427 23,130
--------------------- --------------------
Total current assets 932,967 896,258
Property, plant and equipment, net 3,471,513 3,525,640
Other long-term assets 3,255,553 3,267,212
--------------------- --------------------
Total assets $ 7,660,033 $ 7,689,110
===================== ====================
LIABILITIES AND EQUITY
----------------------
Current liabilities:
Long-term debt due within one year $ 7,082 $ 88,002
Accounts payable and other current liabilities 433,696 437,225
Liabilities related to assets held for sale 10,742 11,128
--------------------- --------------------
Total current liabilities 451,520 536,355
Deferred income taxes and other liabilities 877,332 880,693
Equity units 460,000 460,000
Long-term debt (1) 4,402,108 4,195,629
Manditorily Redeemable Convertible Preferred Securities (1) - 201,250
Shareholders' equity 1,469,073 1,415,183
--------------------- --------------------
Total liabilities and equity $ 7,660,033 $ 7,689,110
===================== ====================
(1) In accordance with FASB Interpretation No. 46R, the Manditorily Redeemable
Convertible Preferred Securities are classified as debt effective January
1, 2004.
Citizens Communications Company
Condensed Consolidated Cash Flow Data
(unaudited)
(Dollars in thousands)
For the three months ended March 31,
---------------------------------------
2004 2003
----------------- --------------------
Income before cumulative effect of change in accounting principle $ 42,868 $ 61,662
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization expense 143,858 138,548
Gain on expiration/settlement of customer advances (24,182) (6,165)
Gain on capital lease termination - (40,703)
Other 44,638 47,010
----------------- --------------------
Net cash provided by operating activities 207,182 200,352
Cash flows from investing activities:
Proceeds from sales of assets, net of selling expenses - 553
Capital expenditures (55,188) (47,752)
Other - (22)
----------------- --------------------
Net cash used in investing activities (55,188) (47,221)
Cash flows from financing activities:
Long-term debt payments (93,560) (89,438)
Other 5,907 (947)
----------------- --------------------
Net cash used in financing activities (87,653) (90,385)
Increase in cash and cash equivalents 64,341 62,746
Cash and cash equivalents at January 1, 583,671 393,177
----------------- --------------------
Cash and cash equivalents at March 31, $ 648,012 $ 455,923
================= ====================
Schedule A
Reconciliation of Non-GAAP Financial Measures
For the quarter ended March 31,
--------------------------------------------
(Dollars in thousands) 2004 2003
------------------ ------------------
Net Income to Free Cash Flow ;
------------------------------
Net Cash Provided by Operating Activities
--------------------------------------------
Net income $ 42,868 $ 127,431
Add back:
Depreciation and amortization 143,858 138,548
Income tax expense 24,450 39,976
Restricted stock based compensation 2,873 1,378
Subtract:
Cash paid for income taxes 227 310
Investment and other income, net 25,294 47,919
Cumulative effect of change in accounting principle - 65,769
Capital expenditures 55,188 47,752
--------------- ------------------
Free cash flow 133,340 145,583
Add back:
Deferred income taxes 20,991 79,808
Noncash (gains)/losses, net (21,312) (44,911)
Investment and other income/(loss) 25,294 47,919
Cash paid for income taxes 227 310
Capital expenditures 55,188 47,752
Subtract:
Changes in current assets and liabilities (20,777) 34,755
Income tax expense 24,450 39,976
Restricted stock based compensation 2,873 1,378
--------------- ------------------
Net cash provided by operating activities $ 207,182 $ 200,352
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