8-K 1 analsched4thqtr2003.txt 2003 4TH QTR ANALYST SCHEDULES 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): March 4, 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 March 4, 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 Chief Financial Officer Date: March 4, 2004 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 2003 Fourth-Quarter Results Stamford, Conn., March 4, 2004 -- Citizens Communications (NYSE:CZN) today reported fourth quarter 2003 consolidated revenues of $554.1 million, consolidated operating income of $125.0 million, and consolidated net income of $15.0 million. Consolidated net income for the quarter includes an $11.3 million impairment charge related to the Vermont Electric division, a loss of $8.7 million related to post-closing purchase price adjustments on the sale of utility assets, a gain of $6.6 million as a result of a settlement of previously reserved telecommunications bankruptcy receivables, and a non-cash gain of $3.7 million from the extinguishment of capital lease obligations at Electric Lightwave. The company produced free cash flow of $112.6 million for the fourth quarter 2003 and $478.1 million for the full year 2003. The company retired $104.2 million of debt during the quarter and ended the quarter with $583.7 million in cash. The company retired $726.6 million of debt and reduced its net debt balance by $923.1 million (or 20 percent) during the full year 2003. For the full year 2003 the company reported net cash provided by continuing operating activities of $732.3 million, net cash provided from investing activities of $108.5 million and net cash used by financing activities of $650.3 million. Fourth quarter 2003 revenue from the company's ILEC operations was $505.6 million, down $14.8 million or 2.8 percent from $520.4 million in the fourth quarter of 2002. The decrease is due primarily to reduced network access services revenues, lower long distance revenue, loss of access lines and the sale of approximately 11,000 access lines in North Dakota in April 2003. These decreases were partially offset by continued increases in enhanced service and data revenues. The company added a record 14,800 DSL customers during the quarter and had more than 120,000 DSL subscribers at December 31, 2003. The company's primary access line count, which does not take into account DSL subscriptions, decreased 17,700 lines during the quarter. Citizens Communications Company Page 2 March 4, 2004 ILEC operating income for the fourth quarter of 2003 was $134.7 million and operating income margin was 26.6 percent, compared to ILEC operating income of $89.2 million and operating income margin of 17.1 percent in the fourth quarter of 2002. Capital expenditures for the ILEC were $82.8 million for the fourth quarter 2003 and were $244.1 million for the full year 2003. Fourth quarter 2003 revenue from Electric Lightwave totaled $40.2 million, operating income was $3.1 million, and capital expenditures were $3.0 million. The company uses certain non-GAAP financial measures in evaluating its performance. These include free cash flow. A reconciliation of the differences between these non-GAAP financial measures 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. Free cash flow is operating income plus depreciation and amortization, restricted stock based compensation and loss on impairment charges minus cash taxes, interest expense and capital expenditures. The company believes that presentation of these 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 Citizens Communications Company Page 3 March 4, 2004 (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 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 For the year ended December 31, December 31, -------------------------- % ---------------------------- % (Amounts in thousands - except per-share amounts) 2003 2002 Change 2003 2002 Change ---------------------------------- ------------------------------------ Income Statement Data Continuing operations Revenue $ 554,085 $ 658,728 -16% $2,444,938 $2,669,332 -8% Cost of services (exclusive of depreciation and amortization 57,064 119,101 -52% 369,689 476,920 -22% Other operating expenses 210,329 236,611 -11% 893,199 995,326 -10% Restricted stock based compensation 2,832 4,786 -41% 8,552 7,029 22% Depreciation and amortization (1) 154,491 191,359 -19% 595,276 755,522 -21% Reserve for telecommunications bankruptcies (6,637) (6,925) -4% (4,377) 10,880 -140% Restructuring and other expenses (263) 15,274 -102% 9,687 37,186 -74% Loss on impairment (2) 11,300 - 100% 15,300 1,074,058 -99% Operating income (loss) 124,969 98,522 27% 557,612 (687,589) 181% Investment and other income (loss), net 7,989 (20,592) 139% 74,913 (85,620) 187% Gain/(loss) on sales of assets, net (8,700) 7,897 -210% (20,492) 9,798 -309% Interest expense (includes dividends on preferred securities) 99,240 112,516 -12% 422,734 474,439 -11% Income tax expense (benefit) 10,066 9,814 3% 67,216 (414,874) 116% Loss from discontinued operations, net of tax - - - - (1,478) 100% Gain on disposal of water segment, net of tax - 12,043 -100% - 181,369 -100% Cumulative effect of change in accounting principle (3) - - - 65,769 (39,812) 265% Net income (loss) attributable to common shareholders 14,952 (24,460) 161% 187,852 (682,897) 128% Weighted average shares outstanding 283,095 281,096 1% 282,434 280,686 1% Net income (loss) attributable to common shareholders $ 0.05 $ (0.09) 156% $ 0.67 $ (2.43) 128% Other Financial Data (4) Total capital expenditures (5) $ 86,357 $ 114,539 -25% $ 278,015 $ 358,742 -23% Free cash flow 112,569 65,761 71% 478,140 333,460 43% Total debt (6) 4,283,631 5,016,272 -15% 4,283,631 5,016,272 -15% Less: Cash and cash equivalents 583,671 393,177 48% 583,671 393,177 48% Net debt 3,699,960 4,623,095 -20% 3,699,960 4,623,095 -20%
(1) Includes $10,577,000 and $23,379,000 of accelerated depreciation for the quarter and year ended December 31, 2002, respectively, related to the closing of our Plano, Texas facility. (2) Shown as the pre-tax amount. (3) 2003 represents the effect of adoption of SFAS No. 143. 2002 represents the write-off of ELI's goodwill. Both are net of tax. (4) A reconciliation of these non-GAAP measures to the most comparable GAAP measure is presented at the end of these tables. (5) 2002 excludes $110,000,000 of previously leased facilities purchased by ELI in April 2002. (6) Excludes equity units and convertible preferred stock. Total debt includes current portion of long term debt.
Citizens Communications Company Financial and Operating Data (unaudited) For the quarter ended For the year ended December 31, December 31, ----------------------------- % --------------------------- % (Dollars in thousands, except operating data) 2003 2002 Change 2003 2002 Change -------------------------------------- -------------------------------------- TELECOMMUNICATIONS Select Income Statement Data Revenue Network access services $ 163,526 $ 174,614 -6% $ 667,042 $ 691,894 -4% Local network services 214,490 214,397 - 859,002 850,319 1% Long distance and data services 76,519 76,902 - 306,834 299,326 3% Directory services 26,339 25,885 2% 106,934 104,383 2% Other 24,725 28,613 -14% 101,123 116,983 -14% ILEC revenue 505,599 520,411 -3% 2,040,935 2,062,905 -1% Electric Lightwave 40,161 41,234 -3% 165,389 175,079 -6% Total revenue 545,760 561,645 -3% 2,206,324 2,237,984 -1% Expenses Network access expense 51,731 60,688 -15% 223,547 235,462 -5% Other operating expenses 206,036 208,383 -1% 826,958 881,696 -6% Restricted stock based compensation 2,638 4,539 -42% 8,275 6,864 21% Depreciation and amortization (1) 154,491 191,351 -19% 595,276 755,158 -21% Reserve for telecommunications bankruptcies (6,637) (6,925) -4% (4,377) 10,880 -140% Restructuring and other expenses (263) 15,274 -102% 9,687 37,186 -74% Loss on impairment (2) - - - - 656,658 -100% Total expenses 407,996 473,310 -14% 1,659,366 2,583,904 -36% Operating Income (Loss) ILEC $ 134,712 $ 89,174 51% $ 537,248 $ 413,241 30% ELI 3,052 (839) 464% 9,710 (759,161) 101% Other Financial and Operating Data ILEC capital expenditures $ 82,829 $ 83,818 -1% $ 244,089 $ 288,823 -15% ELI capital expenditures (3) 2,982 3,800 -22% 9,496 12,003 -21% ILEC access lines (4) 2,386,456 2,444,423 -2% 2,386,456 2,444,423 -2% DSL subscribers 120,461 71,058 70% 120,461 71,058 70% ILEC switched access minutes of use (in millions) 2,922 3,069 -5% 11,971 12,252 -2% ILEC average monthly revenue per average line $ 70.37 $ 70.75 -1% $ 70.43 $ 69.80 1%
(1) See footnote (1) on first page. (2) See footnote (2) on first page. (3) See footnote (5) on first page. (4) On April 1, 2003 and October 31, 2002, we completed the sale of approximately 11,000 and 4,000 telephone access lines, respectively, in the state of North Dakota. These sales affect the comparability of data presented.
Citizens Communications Company Financial and Operating Data (unaudited) For the quarter ended For the year ended December 31, December 31, ---------------------------- % -------------------------- % (Dollars in thousands) 2003 2002 Change 2003 2002 Change ------------------------------------- ------------------------------------- GAS AND ELECTRIC SECTORS (1) Select Income Statement Data Revenue $ 8,325 $ 97,083 -91% $ 238,614 $ 431,348 -45% Gas, electric energy and fuel oil purchased 5,333 58,413 -91% 146,142 241,458 -39% Other operating expenses 4,293 28,228 -85% 66,241 113,630 -42% Restricted stock based compensation 194 247 -21% 277 165 68% Depreciation and amortization (2) - 8 -100% - 364 -100% Loss on impairment 11,300 - 100% 15,300 417,400 -96% Operating income (loss) (12,795) 10,187 -226% 10,654 (341,669) 103% Other Financial Data Capital expenditures 497 9,140 -95% 23,861 39,660 -40%
(1) Our Kauai Electric operations were sold on November 1, 2002. In addition, 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 distribution facilities were sold on December 1, 2003. The sales of these properties affects the comparability of data presented. (2) Our gas and electric operations are reported as "held for sale." Accordingly, we ceased to record depreciation expense effective October 1, 2000 and January 1, 2001, respectively.
Citizens Communications Company Condensed Consolidated Balance Sheet Data (Dollars in thousands) December 31, 2003 December 31, 2002 --------------------- -------------------- ASSETS ------ Current assets: Cash and cash equivalents $ 583,671 $ 393,177 Accounts receivable and other current assets 289,457 360,043 Assets held for sale 23,130 447,764 --------------------- -------------------- Total current assets 896,258 1,200,984 Property, plant and equipment, net 3,525,640 3,690,056 Other long-term assets 3,267,212 3,331,665 --------------------- -------------------- Total assets $ 7,689,110 $ 8,222,705 ===================== ==================== LIABILITIES AND EQUITY ---------------------- Current liabilities: Long-term debt due within one year $ 88,002 $ 58,911 Accounts payable and other current liabilities 432,225 526,142 Liabilities related to assets held for sale 16,128 145,969 --------------------- -------------------- Total current liabilities 536,355 731,022 Deferred income taxes and other liabilities 880,693 700,933 Equity units 460,000 460,000 Long-term debt 4,195,629 4,957,361 Mandatorily Redeemable Convertible Preferred Securities 201,250 201,250 Shareholders' equity 1,415,183 1,172,139 --------------------- -------------------- Total liabilities and equity $ 7,689,110 $ 8,222,705 ===================== ====================
Citizens Communications Company Condensed Consolidated Cash Flow Data (Dollars in thousands) For the year ended December 31, ------------------------------------ 2003 2002 ----------------- ----------------- Income (loss) from continuing operations before extraordinary expense and cumulative effect of change in accounting principle $ 122,083 $ (822,976) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization expense 595,276 755,522 Investment write-downs - 117,455 Gain on extinguishment of debt (75,569) (26,330) Investment (gains)/losses - (3,363) (Gain)/loss on sales of assets, net 20,492 (9,798) Loss on impairment 15,300 1,074,058 Other 54,743 (447,701) ----------------- ----------------- Net cash provided by continuing operating activities 732,325 636,867 Cash flows from investing activities: Proceeds from sales of assets, net of selling expenses 388,079 224,678 Capital expenditures (1) (278,015) (468,742) ELI share purchases - (6,800) Other (1,612) 9,778 ----------------- ----------------- Net cash provided from (used by) investing activities 108,452 (241,086) Cash flows from financing activities: Long-term debt principal payments (653,462) (1,062,169) Other 3,179 10,048 ----------------- ----------------- Net cash used by financing activities (650,283) (1,052,121) Cash provided by discontinued operations - 833,648 Increase in cash and cash equivalents 190,494 177,308 Cash and cash equivalents at January 1, 393,177 215,869 ----------------- ----------------- Cash and cash equivalents at December 31, $ 583,671 $ 393,177 ================= =================
(1) 2002 includes $110,000 of previously leased facilities purchased by ELI in April 2002.
Schedule A Reconciliation of Non-GAAP Financial Measures For the quarter ended December 31, For the year ended December 31, ---------------------------------- ------------------------------- (Dollars in thousands) 2003 2002 2003 2002 ---------------- ---------------- --------------- -------------- Operating Income (Loss) to Free Cash Flow; ------------------------------------------ Net Cash Provided by Continuing Operating Activities ---------------------------------------------------- Operating income (loss) $ 124,969 $ 98,522 $ 557,612 $ (687,589) Add back: Depreciation and amortization 154,491 191,359 595,276 755,522 Restricted stock based compensation 2,832 4,786 8,552 7,029 Loss on impairment 11,300 - 15,300 1,074,058 Subtract: Cash paid (refunded) for income taxes (4,574) 1,851 (2,149) (17,621) Interest expense 99,240 112,516 422,734 474,439 Capital expenditures 86,357 114,539 278,015 358,742 ---------------- ---------------- ---------------- -------------- Free cash flow 112,569 65,761 478,140 333,460 Add back: Deferred income taxes (14,300) 108,508 77,188 (252,468) Noncash (gains)/losses 5,020 3,648 (55,077) 77,964 Investment and other income/(loss) 7,989 (20,592) 74,913 (85,620) Cash paid/(refunded) for income taxes (4,574) 1,851 (2,149) (17,621) Capital expenditures 86,357 114,539 278,015 358,742 Subtract: Changes in current assets and liabilities 3,612 129,040 22,445 195,233 (Gain)/loss on sale of assets 8,700 (7,897) 20,492 (9,798) Income tax expense (benefit) 10,066 9,814 67,216 (414,874) Restricted stock based compensation 2,832 4,786 8,552 7,029 ---------------- ---------------- ---------------- -------------- Net cash provided by continuing operating activities $ 167,851 $ 137,972 $ 732,325 $ 636,867 ================ ================ ================ ==============