-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TTJ6zk3UXuJicnxJn04MW5smzL453xgScqzV/v1DGdj6zK+j4IfFiAjfWQgvNwh9 YMpAi9yYGbxBxccqV5bEsw== 0000020520-07-000021.txt : 20070502 0000020520-07-000021.hdr.sgml : 20070502 20070502084601 ACCESSION NUMBER: 0000020520-07-000021 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20070331 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20070502 DATE AS OF CHANGE: 20070502 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CITIZENS COMMUNICATIONS CO CENTRAL INDEX KEY: 0000020520 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 060619596 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11001 FILM NUMBER: 07808421 BUSINESS ADDRESS: STREET 1: HIGH RIDGE PK BLDG 3 CITY: STAMFORD STATE: CT ZIP: 06905 BUSINESS PHONE: 2036145600 MAIL ADDRESS: STREET 1: THREE HIGH RIDGE PARK CITY: STAMFORD STATE: CT ZIP: 06905 FORMER COMPANY: FORMER CONFORMED NAME: CITIZENS UTILITIES CO DATE OF NAME CHANGE: 19920703 8-K 1 earnrelease1stqtr07cover.txt EARNINGS RELEASE COVER UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 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 2, 2007 Citizens Communications Company - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware - -------------------------------------------------------------------------------- (State or other jurisdiction of incorporation) 001-11001 06-0619596 - -------------------------------------------------------------------------------- (Commission File Number) (IRS Employer Identification No.) 3 High Ridge Park, Stamford, Connecticut 06905 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (203) 614-5600 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- (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 obligation of the registrant under any of the following provisions (see General Instruction A.2. below): | | 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 May 2, 2007, the 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 Exhibit 99.1 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 --------------------------------- (d) Exhibits 99.1 Press Release of Citizens Communications Company released May 2, 2007. SIGNATURES 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 hereunto duly authorized. CITIZENS COMMUNICATIONS COMPANY Date: May 2, 2007 By: /s/ Robert J. Larson -------------------------------- Robert J. Larson Senior Vice President and Chief Accounting Officer EX-99.1 2 analsched1stqtr07.txt 1ST QUARTER 2007 ANALYST SCHEDULES Exhibit 99.1 Citizens Communications 3 High Ridge Park Stamford, CT 06905 203.614.5600 Web site: www.czn.net Contact: Brigid Smith 203.614.5042 bsmith@czn.com Citizens Communications Reports 2007 First-Quarter Results Stamford, Conn., May 2, 2007 -- Citizens Communications (NYSE:CZN) today reported first quarter 2007 revenues of $556.1 million, operating income of $193.3 million, and net income of $67.7 million. First quarter 2007 revenue was $556.1 million, as compared to $506.9 million in the first quarter of 2006. First quarter 2007 results include revenues of $20.7 million related to the operations of Commonwealth Telephone Enterprises, since the date of acquisition on March 8, 2007. Revenues, excluding the acquired property, were up 5.6 percent as compared to the same period last year due to higher access, data and internet services, partially offset by declines in local services. Access revenues were significantly higher in the first quarter of 2007 as compared to 2006 due to the settlement of a switched access dispute with a favorable impact of $38.7 million offset by declines in other access service revenues (which include subsidy payments we receive from federal and state agencies). The Company experienced 13.8 percent growth in data and internet services revenue in the first quarter of 2007, compared to the first quarter of 2006. First quarter 2007 other operating expenses were $186.5 million, as compared to $184.6 million in the first quarter of 2006. Excluding the expense increase due to the acquisition, the company's other operating expenses for the first quarter of 2007 decreased by approximately $8.2 million or 4.4 percent, as compared to the first quarter of 2006 primarily driven by reductions in employees and improved expense control in benefit costs. Depreciation and amortization expense for the first quarter of 2007 was $122.2 million, as compared to $122.0 million in the first quarter of 2006. Depreciation and amortization expense for the first quarter of 2007, excluding the impact of the acquisition, decreased $6.7 million or 5.5 percent as compared to the first quarter of 2006. The decrease is primarily due to a declining net asset base. The Company added approximately 70,800 high-speed internet customers during the quarter reflecting 20,300 from the base Citizens property and 50,500 from the acquired Commonwealth property, and had more than 464,000 high-speed data subscribers at March 31, 2007. -MORE- Operating income for the first quarter of 2007 was $193.3 million and operating income margin was 34.8 percent, compared to $157.3 million and 31.0 percent in the first quarter of 2006. Capital expenditures were $45.1 million for the first quarter of 2007, including $4.3 million related to the acquired property. Free cash flow for the first quarter was $187.6 million. The company's dividend represents a payout of 46 percent of free cash flow for the first quarter. During the first quarter, the Company repurchased 823,000 shares of its common stock for $12.0 million. "We are off to a good start with strong first quarter results. Product revenue growth coupled with disciplined expense control generated a 56.7% operating cash flow margin and our focus on the customer drove penetration levels for all voice, data and video product bundles," said Maggie Wilderotter, Chairman and CEO of Citizens. "We are very excited about completing the Commonwealth acquisition and full integration of these Pennsylvania properties is now underway." Outlook - ------- As a result of the favorable settlement dispute and the successful closing of the merger transaction with Commonwealth Telephone Enterprises on March 8, 2007, the Company is revising its 2007 guidance. We now expect to spend between $315 million and $325 million in capital expenditures in 2007. Free cash flow for 2007 is now estimated to be between $500 million and $520 million. The company uses certain non-GAAP financial measures in evaluating its performance. These include free cash flow and operating cash flow. A reconciliation of the differences between free cash flow and operating 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 and operating cash flow, as the company defines them, 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 in determining such measure. Operating cash flow has similar shortcomings as interest, income taxes, capital expenditures, debt repayments and dividends are not deducted in determining this 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 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 successfully integrate Commonwealth's operations and to realize the synergies from the acquisition; 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. 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 and the foregoing information should be read in conjunction with these filings. We do 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 March 31, --------------------------- % (Amounts in thousands, except per share amounts) 2007 2006 Change --------------------------------------- Income Statement Data Revenue $556,147 $506,861 10% Network access expenses 50,793 40,218 26% Other operating expenses 186,464 184,624 1% Stock based compensation 3,407 2,677 27% Depreciation and amortization 122,181 122,004 0% Operating income 193,302 157,338 23% Investment and other income (loss), net 10,017 (1,351) NM Interest expense 93,964 85,393 10% Income tax expense 41,688 26,607 57% Income from discontinued operations, net of tax - 6,496 NM Net income attributable to common shareholders 67,667 50,483 34% Weighted average shares outstanding 326,542 327,132 0% Basic net income per share attributable to common shareholders (2) $ 0.21 $ 0.15 40% Other Financial Data Capital expenditures $ 45,111 $ 43,765 3% Free cash flow (3) 187,555 163,296 15% Dividends paid 85,462 82,633 3% Dividend payout ratio (4) 46% 51% -10%
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises (CTE) for approximately $1.1 billion, and have included the historical results of CTE from the date of acquisition. (2) Calculated based on weighted average shares outstanding. (3) A reconciliation to the most comparable GAAP measure is presented at the end of these tables. (4) Represents dividends paid divided by free cash flow.
Citizens Communications Company Financial and Operating Data (1) (unaudited) For the quarter ended March 31, ------------------------------- % (Amounts in thousands, except operating data) 2007 2006 Change ------------------------------------------- TELECOMMUNICATIONS Select Income Statement Data Revenue Local services $ 206,043 $ 203,566 1% Data and internet services 116,425 100,089 16% Access services 139,024 111,237 25% Long distance services 40,428 39,158 3% Directory services 28,670 28,797 0% Other 25,557 24,014 6% ------------- -------------- Total revenue 556,147 506,861 10% ------------- -------------- Expenses Network access expenses 50,793 40,218 26% Other operating expenses 186,464 184,624 1% Stock based compensation 3,407 2,677 27% Depreciation and amortization 122,181 122,004 0% ------------- -------------- Total expenses 362,845 349,523 4% ------------- -------------- Operating Income $ 193,302 $ 157,338 23% ============= ============== Other Financial and Operating Data Access lines 2,538,471 2,213,731 15% High-speed internet subscribers 464,055 341,452 36% Wireline bundle subscribers 579,506 462,661 25% Switched access minutes of use (in millions) 2,438 2,654 -8% Average monthly revenue per average access line (2) $ 84.38 $ 75.90 11%
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises (CTE) for approximately $1.1 billion, and have included the historical results of CTE from the date of acquisition. (2) For the quarter ended March 31, 2007, the calculation excludes CTE data and includes the $38.7 million favorable impact from the settlement of a switched access dispute. The amount is $78.29 without the $38.7 million favorable impact from the settlement.
Citizens Communications Company Condensed Consolidated Balance Sheet Data (1) (Amounts in thousands) (Unaudited) March 31, 2007 December 31, 2006 -------------------- ------------------- ASSETS ------ Current assets: Cash and cash equivalents $ 1,037,729 $ 1,041,106 Accounts receivable and other current assets 279,496 231,887 -------------------- ------------------- Total current assets 1,317,225 1,272,993 Property, plant and equipment, net 3,329,687 2,983,504 Other long-term assets 3,582,405 2,534,708 -------------------- ------------------- Total assets $ 8,229,317 $ 6,791,205 ==================== =================== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current liabilities: Long-term debt due within one year $ 569,848 $ 39,271 Accounts payable and other current liabilities 423,656 386,372 -------------------- ------------------- Total current liabilities 993,504 425,643 Deferred income taxes and other liabilities 1,164,223 846,775 Long-term debt 4,755,148 4,460,755 Shareholders' equity 1,316,442 1,058,032 -------------------- ------------------- Total liabilities and shareholders' equity $ 8,229,317 $ 6,791,205 ==================== ===================
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises (CTE) for approximately $1.1 billion, and have included the historical results of CTE from the date of acquisition.
Citizens Communications Company Condensed Consolidated Cash Flow Data (1) (unaudited) (Amounts in thousands) For the three months ended March 31, ---------------------------------------- 2007 2006 ----------------- ------------------ Cash flows provided by (used in) operating activities: Net income $ 67,667 $ 50,483 Deduct: Income from discontinued operations - (6,496) Adjustments to reconcile income to net cash provided by operating activities: Depreciation and amortization expense 122,181 122,004 Stock based compensation 3,407 2,677 Other (21,994) (4,055) ----------------- ------------------ Net cash provided by continuing operating activities 171,261 164,613 Cash flows from investing activities: Capital expenditures (45,111) (43,765) Cash paid for Commonwealth acquisition, net (649,507) - Other assets (purchased) distributions received, net 571 324 ----------------- ------------------ Net cash used by investing activities (694,047) (43,441) Cash flows from financing activities: Long-term debt borrowings 950,000 - Financing costs paid (9,815) - Long-term debt payments (327,815) (240) Issuance of common stock 5,119 9,452 Dividends paid (85,462) (82,633) Common stock repurchased (12,016) (37,916) Other (602) (473) ----------------- ------------------ Net cash used by financing activities 519,409 (111,810) Cash flows of discontinued operations: Operating activities - 8,580 Investing activities - (2,422) Financing activities - - ----------------- ------------------ Net cash provided by discontinued operations - 6,158 (Decrease) Increase in cash and cash equivalents (3,377) 15,520 Cash and cash equivalents at January 1, 1,041,106 268,917 ----------------- ------------------ Cash and cash equivalents at March 31, $ 1,037,729 $ 284,437 ================= ================== Cash paid during the period for: Interest $ 97,416 $ 95,079 Income taxes (refunds) $ 6,786 $ (133)
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises (CTE) for approximately $1.1 billion, and have included the historical results of CTE from the date of acquisition.
Schedule A Reconciliation of Non-GAAP Financial Measures (1) For the quarter ended March 31, ----------------------------------------- (Amounts in thousands) 2007 2006 -------------------- ------------------- Net Income to Free Cash Flow; ----------------------------- Net Cash Provided by Operating Activities ----------------------------------------- Net income $ 67,667 $ 50,483 Add back: Depreciation and amortization 122,181 122,004 Income tax expense 41,688 26,607 Stock based compensation 3,407 2,677 Subtract: Cash paid (refunded) for income taxes 6,786 (133) Investment and other income (loss), net of interest income (4,509) (5,157) Capital expenditures 45,111 43,765 -------------------- ------------------- Free cash flow 187,555 163,296 Add back: Deferred income taxes 23,614 24,163 Non-cash (gains)/losses, net 6,389 7,039 Investment and other income (loss), net of interest income (4,509) (5,157) Cash paid (refunded) for income taxes 6,786 (133) Capital expenditures 45,111 43,765 Subtract: Changes in current assets and liabilities 48,590 32,580 Income tax expense 41,688 26,607 Stock based compensation 3,407 2,677 Income from discontinued operations - 6,496 -------------------- ------------------- Net cash provided by operating activities $ 171,261 $ 164,613 ==================== ===================
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises (CTE) for approximately $1.1 billion, and have included the historical results of CTE from the date of acquisition.
Schedule B Reconciliation of Non-GAAP Financial Measures (1) For the quarter ended March 31, ------------------------------------------ (Amounts in thousands) 2007 2006 -------------------- -------------------- Operating Cash Flow and ----------------------- Operating Cash Flow Margin -------------------------- Operating Income $ 193,302 $ 157,338 Add back: Depreciation and amortization 122,181 122,004 -------------------- -------------------- Operating cash flow $ 315,483 $ 279,342 ==================== ==================== Revenue $ 556,147 $ 506,861 ==================== ==================== Operating income margin (Operating income divided by revenue) 34.8% 31.0% ==================== ==================== Operating cash flow margin (Operating cash flow divided by revenue) 56.7% 55.1% ==================== ====================
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises (CTE) for approximately $1.1 billion, and have included the historical results of CTE from the date of acquisition.
Schedule C Citizens Communications Company Consolidating Financial and Operating Data Support (1) (unaudited) For the quarter ended March 31, 2007 ------------------------------------------------ Citizens For the CTE (1) (excluding Quarter Ended % (Amounts in thousands, except operating data) As Reported (for 23 days) CTE) (1) March 31, (2006) Change ------------------------------------------------ ----------------- ------ TELECOMMUNICATIONS Select Income Statement Data Revenue Local services $ 206,043 $ 8,674 $ 197,369 $ 203,566 -3% Data and internet services 116,425 2,556 113,869 100,089 14% Access services 139,024 5,695 133,329 111,237 20% Long distance services 40,428 2,047 38,381 39,158 -2% Directory services 28,670 68 28,602 28,797 -1% Other 25,557 1,626 23,931 24,014 0% --------------- --------------- --------------- ---------------- Total revenue 556,147 20,666 535,481 506,861 6% --------------- --------------- --------------- ---------------- Expenses Network access expenses 50,793 3,849 46,944 40,218 17% Other operating expenses 186,464 10,004 176,460 184,624 -4% Stock based compensation 3,407 - 3,407 2,677 27% Depreciation and amortization 122,181 6,899 (2) 115,282 122,004 -6% --------------- --------------- --------------- ---------------- Total expenses 362,845 20,752 342,093 349,523 -2% --------------- --------------- --------------- ---------------- Operating Income $ 193,302 $ (86) $ 193,388 $ 157,338 23% =============== =============== =============== ================ Other Financial and Operating Data Capital expenditures $ 45,111 $ 4,285 $ 40,826 $ 43,765 -7% Access lines 2,538,471 434,577 2,103,894 2,213,731 -5% High-speed internet subscribers 464,055 50,537 413,518 341,452 21% Wireline bundle subscribers 579,506 37,620 541,886 462,661 17% Switched access minutes of use (in millions) N/A N/A 2,438 2,654 -8% Average monthly revenue per average access line (3) N/A N/A $ 84.38 $ 75.90 11%
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises (CTE) for approximately $1.1 billion, and have included the historical results of CTE from the date of acquisition. (2) Includes amortization expense of $3,939 for the 23 days of March regarding the customer base acquired in the Commonwealth acquisition. (3) For the quarter ended March 31, 2007, the calculation includes the $38.7 million favorable impact from the settlement of a switched access dispute. The amount is $78.29 without the $38.7 million favorable impact from the settlement. -----END PRIVACY-ENHANCED MESSAGE-----