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): November 2, 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 November 2, 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
November 2, 2005 announcing 2005 3rd 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: November 2, 2005
Exhibit 99.1
Citizens Communications
3 High Ridge Park
Stamford, CT 06905
203.614.5600
Web site: www.czn.net
Contact:
Brigid M. Smith
Assistant Vice President
Corporate Communications
203.614.5042
bsmith@czn.com
Citizens Communications Reports
2005 Third-Quarter Results; Declares Quarterly Dividend
Stamford, Conn., November 2, 2005 -- Citizens Communications (NYSE:CZN) today
reported third quarter 2005 revenues of $537.3 million; operating income of
$141.6 million; and net income of $38.4 million.
Third quarter 2005 revenue from the company's ILEC operations was $497.6
million, as compared to $500.0 million in the third quarter of 2004. The
decrease is due primarily to fewer access lines, lower access service revenues
(which includes subsidy payments we receive from federal and state agencies) and
reduced long distance revenue. Subsidy revenue declined primarily due to a
missed filing deadline with the Universal Service Fund (USF). We have received a
Waiver from the FCC for the late filing and expect to recognize approximately
$10 million of additional USF subsidy revenue in the fourth quarter. Growth in
data and enhanced service revenues partially offset the decreases. Data service
revenues increased 28 percent compared to the third quarter of 2004.
The company added 23,000 high-speed internet customers during the quarter and
had 290,200 high-speed data subscribers at September 30, 2005. The number of the
company's high-speed internet subscribers has increased by more than 102,000 or
55 percent from a year ago.
ILEC operating income for the third quarter of 2005 was $137.0 million and
operating income margin was 27.5 percent, compared to $69.3 million and 13.9
percent in the third quarter of 2004. This increase is principally due to the
management succession and strategic alternative charges in 2004. Capital
expenditures for the ILEC were $57.9 million for the third quarter of 2005.
Free cash flow was $130.2 million during the third quarter and has increased
13.0 percent from $371.6 million to $421.3 million during the first nine months
of 2005. The company's dividend represents a payout of 60.6 percent of free cash
flow for the first nine months of 2005.
During the third quarter, the company repurchased $153.4 million, or 11,256,500
shares of stock. The company has now repurchased a total of $172.0 million, or
12,656,500 shares of stock under its $250.0 million authorized share repurchase
program.
The company's next regular quarterly cash dividend of $0.25 per share will be
paid on December 30, 2005 to shareholders of record on December 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 nine months ended
September 30, % September 30, %
----------------------- ---------------------------
(Amounts in thousands - except per-share amounts) 2005 2004 Change 2005 2004 Change
---------------------------------- -------------------------------------
Income Statement Data (2)
Revenue $537,346 $539,188 0% $1,606,367 $1,629,295 -1%
Cost of services (exclusive of depreciation and
amortization) 51,050 49,655 3% 145,766 151,915 -4%
Other operating expenses 208,300 200,838 4% 608,552 617,099 -1%
Management succession and strategic alternatives
expenses (3) - 75,858 -100% - 90,632 -100%
Stock based compensation 2,052 1,842 11% 6,433 7,759 -17%
Depreciation and amortization 134,327 140,908 -5% 411,990 428,191 -4%
Operating income 141,617 70,087 102% 433,626 333,699 30%
Investment and other income (loss) 6,768 (13,654) 150% 12,749 16,849 -24%
Interest expense (includes interest on convertible
debt) 85,228 90,863 -6% 253,096 286,296 -12%
Income tax expense (benefit) 24,781 (21,934) 213% 69,892 12,869 443%
Income from discontinued operations, net of tax - 1,206 -100% 2,207 3,987 -45%
Net income (loss) attributable to common shareholders 38,376 (11,290) 440% 125,594 55,370 127%
Weighted average shares outstanding 338,928 309,732 9% 339,026 294,455 15%
Basic net income (loss) per share attributable to
common shareholders (4) $ 0.11 $ (0.04) 375% $ 0.37 $ 0.19 95%
Other Financial Data
Total capital expenditures $ 61,157 $ 67,538 -9% $ 175,460 $ 200,180 -12%
Free cash flow (5) 130,214 129,224 1% 421,258 371,609 13%
(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) Includes $36,618 related to stock based compensation expense for the three
and nine months ended September 30, 2004.
(4) Calculated based on weighted average shares outstanding.
(5) 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 nine months ended
September 30, % September 30, %
--------------------------- --------------------------
(Dollars in thousands, except operating data) 2005 2004 Change 2005 2004 Change
------------------------------------- -------------------------------------
TELECOMMUNICATIONS
Select Income Statement Data
Revenue
Access services $ 145,915 $ 157,692 -7% $ 455,389 $ 474,399 -4%
Local services 208,630 214,299 -3% 624,367 640,458 -3%
Long distance services 43,003 46,089 -7% 129,091 138,966 -7%
Data services 45,806 35,913 28% 126,806 101,211 25%
Directory services 28,362 27,312 4% 84,866 82,987 2%
Other 25,860 18,673 38% 69,071 64,262 7%
ILEC revenue 497,576 499,978 0% 1,489,590 1,502,283 -1%
Electric Lightwave 39,770 39,210 1% 116,777 117,277 0%
Total revenue 537,346 539,188 0% 1,606,367 1,619,560 -1%
Expenses
Network access expense 51,050 49,655 3% 145,766 146,392 0%
Other operating expenses 208,300 200,827 4% 608,552 610,555 0%
Management succession and strategic alternatives
expenses - 75,858 -100% - 90,632 -100%
Stock based compensation 2,052 1,842 11% 6,433 7,759 -17%
Depreciation and amortization 134,327 140,908 -5% 411,990 428,191 -4%
Total expenses 395,729 469,090 -16% 1,172,741 1,283,529 -9%
Operating Income
ILEC $ 137,015 $ 69,324 98% $ 423,589 $ 330,910 28%
ELI 4,602 774 495% 10,037 5,121 96%
Other Financial and Operating Data
ILEC capital expenditures $ 57,888 $ 65,622 -12% $ 162,226 $ 191,934 -15%
ELI capital expenditures 3,244 1,907 70% 13,134 8,066 63%
ILEC depreciation and amortization 128,115 134,787 -5% 393,192 410,290 -4%
ELI depreciation and amortization 6,212 6,121 1% 18,798 17,901 5%
ILEC access lines 2,245,088 2,346,018 -4% 2,245,088 2,346,018 -4%
High-speed internet subscribers 290,228 187,463 55% 290,228 187,463 55%
ILEC switched access minutes of use (in millions) 2,808 2,973 -6% 8,520 8,890 -4%
ILEC average monthly revenue per average RGU (2) $ 65.32 $ 65.87 -1% $ 65.32 $ 66.24 -1%
(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 nine months ended
September 30, % September 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 - 11 -100% - 6,544 -100%
Operating income (loss) - (11) 100% - (2,332) 100%
(1) See footnote (2) on the first page.
Citizens Communications Company
Condensed Consolidated Balance Sheet Data (1)
(Amounts in thousands)
(unaudited)
September 30, 2005 December 31, 2004
-------------------- --------------------
ASSETS
Current assets:
Cash and cash equivalents $ 286,609 $ 167,463
Accounts receivable and other current assets 249,626 279,295
Assets of discontinued operations - 24,122
--------------------- --------------------
Total current assets 536,235 470,880
Property, plant and equipment, net 3,192,090 3,335,850
Other long-term assets 2,727,092 2,861,689
--------------------- --------------------
Total assets $ 6,455,417 $ 6,668,419
===================== ====================
LIABILITIES AND EQUITY
Current liabilities:
Long-term debt due within one year $ 227,762 $ 6,380
Accounts payable and other current liabilities 375,844 410,405
Liabilities of discontinued operations - 735
--------------------- --------------------
Total current liabilities 603,606 417,520
Deferred income taxes and other liabilities 693,210 621,661
Long-term debt 4,006,967 4,266,998
Shareholders' equity 1,151,634 1,362,240
--------------------- --------------------
Total liabilities and equity $ 6,455,417 $ 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 nine months ended September 30,
---------------------------------------
2005 2004
------------------- ------------------
Income from continuing operations $ 123,387 $ 51,383
Adjustments to reconcile income from continuing operations
to net cash provided by continuing operating activities:
Depreciation and amortization 411,990 428,191
Gain on expiration/settlement of customer advances (492) (25,345)
Loss on debt exchange 3,175 -
Stock based compensation 6,433 44,212
Other 59,852 38,457
------------------- ------------------
Net cash provided by continuing operating activities 604,345 536,898
Cash flows from investing activities:
Proceeds from sales of assets, net of selling expenses 24,195 59,045
Securities sold 1,112 -
Capital expenditures (175,460) (200,180)
Other assets (purchased) distributions received, net (803) (26,715)
------------------- ------------------
Net cash used by investing activities (150,956) (167,850)
Cash flows from financing activities:
Long-term debt payments (6,173) (513,795)
Issuance of common stock 46,739 530,197
Dividends paid (255,327) (747,937)
Shares repurchased (161,898) -
Other (1,720) (22,460)
------------------- ------------------
Net cash used by financing activities (378,379) (753,995)
Cash provided by discontinued operations 44,136 303
Increase (decrease) in cash and cash equivalents 119,146 (384,644)
Cash and cash equivalents at January 1, 167,463 583,671
------------------- ------------------
Cash and cash equivalents at September 30, $ 286,609 $ 199,027
=================== ==================
Cash paid during the period for:
Interest $ 244,395 $ 264,174
Income taxes $ 2,235 $ 2,196
(1) See footnote (1) on the first page.
Schedule A
Reconciliation of Non-GAAP Financial Measures (1)
(unaudited)
For the quarter ended September 30, For the nine months ended September 30,
------------------------------------ ----------------------------------------
(Amounts in thousands) 2005 2004 2005 2004
----------------- ---------------- ------------------- -----------------
Net Income (Loss) from Continuing Operations
--------------------------------------------
to Free Cash Flow; Net Cash Provided by
---------------------------------------
Continuing Operating Activities
-------------------------------
Net income (loss) from continuing operations $ 38,376 $ (12,496) $ 123,387 $ 51,383
Add back:
Depreciation and amortization 134,327 140,908 411,990 428,191
Income tax expense (benefit) 24,781 (21,934) 69,892 12,869
Management succession and strategic alternatives
expenses - 75,858 - 90,632
Stock based compensation 2,052 1,842 6,433 7,759
Subtract:
Cash paid for income taxes 1,397 1,070 2,235 2,196
Investment and other income (loss) 6,768 (13,654) 12,749 16,849
Capital expenditures 61,157 67,538 175,460 200,180
----------------- ----------------- ------------------- -----------------
Free cash flow 130,214 129,224 421,258 371,609
Add back:
Deferred income taxes 10,230 (27,184) 56,231 15,123
Non-cash (gains)/losses, net 6,216 49,798 16,471 44,579
Investment and other income (loss) 6,768 (13,654) 12,749 16,849
Cash paid for income taxes 1,397 1,070 2,235 2,196
Capital expenditures 61,157 67,538 175,460 200,180
Subtract:
Changes in current assets and liabilities 973 (21,652) 3,734 2,378
Income tax expense (benefit) 24,781 (21,934) 69,892 12,869
Management succession and strategic alternatives
expenses - 75,858 - 90,632
Stock based compensation 2,052 1,842 6,433 7,759
----------------- ----------------- ------------------- -----------------
Net cash provided by continuing operating
activities $ 188,176 $ 172,678 $ 604,345 $ 536,898
================= ================= =================== =================
See footnote (1) on the first page.