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 8, 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 March 8, 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
March 8, 2005 announcing 2004 Fourth 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: March 8, 2005
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 Fourth-Quarter Results and Declares Dividend
Stamford, Conn., March 8, 2005 -- Citizens Communications (NYSE:CZN) today
reported fourth-quarter 2004 consolidated revenues of $545 million, consolidated
operating income of $144.4 million, and consolidated net income of $16.8
million. Consolidated net income reflects $50.3 million of pre-tax expense
related to the early retirement of debt. The company's effective income tax rate
for 2004 was 15.6 percent.
Fourth-quarter 2004 revenue from the company's ILEC operations was $506.3
million, an increase from $505.6 million in the fourth quarter of 2003.
Increases in data and enhanced service revenues more than offset lower access
services revenues, reduced long distance revenue and loss of access lines. Data
service revenues increased 28 percent compared to the fourth quarter of 2003.
The company's revenue generating units (which consists of access lines and
high-speed Internet subscribers) increased 1 percent from a year ago as the
company added a record 24,800 high-speed Internet customers during the quarter
and had 212,300 high-speed data subscribers at December 31, 2004. The number of
the company's high-speed Internet subscribers has increased by 76 percent from a
year ago. The company's access line count, which does not take into account
high-speed Internet subscribers, decreased 25,200 lines during the quarter.
ILEC operating income for the fourth quarter of 2004 was $139.9 million and
operating income margin was 27.6 percent, compared to $134.7 million and 26.6
percent in the fourth quarter of 2003. Capital expenditures for the ILEC were
$71.8 million for the fourth quarter of 2004, compared to $82.8 million in the
year-ago period.
Free Cash flow increased 13 percent to $127.9 million during the fourth quarter
of 2004 and increased 6 percent to $505.9 million for the full year. The
company's quarterly dividend represents a payout of 66 percent of 2004 Free Cash
Flow.
During 2004 the company retired or refinanced more than $1.2 billion of debt.
The company expects to save approximately $60.4 million per year in interest
expense as a result of these transactions.
--MORE --
The company's next quarterly dividend of $0.25 per common share will be paid in
cash on March 31, 2005 to shareholders of record on March 18, 2005. The company
expects that all of the dividends paid to stockholders in 2005 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.
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
(unaudited)
For the quarter ended For the year ended
December 31, December 31,
-------------------------- % ---------------------------- %
(Amounts in thousands - except per-share amounts) 2004 2003 Change 2004 2003 Change
----------------------------------- ------------------------------------
Income Statement Data (1)
Revenue $ 545,028 $ 554,085 -2% $2,192,980 $2,444,938 -10%
Cost of services (exclusive of depreciation and
amortization) 48,534 57,064 -15% 205,166 369,689 -45%
Other operating expenses 207,401 210,066 -1% 831,491 893,199 -7%
Management succession and strategic alternatives
expenses (2) - - - 90,632 - 100%
Restricted stock based compensation 1,682 2,832 -41% 8,695 8,552 2%
Depreciation and amortization 143,060 154,491 -7% 572,710 595,276 -4%
Reserve for telecommunications bankruptcies - (6,637) 100% - (4,377) 100%
Restructuring and other expenses - - - - 9,687 -100%
Loss on impairment - 11,300 -100% - 15,300 -100%
Operating income 144,351 124,969 16% 484,286 557,612 -13%
Investment and other income (loss), net (36,589) (711) - (19,733) 54,421 -136%
Interest expense (includes dividends on preferred
securities) 92,726 99,240 -7% 379,024 422,734 -10%
Income tax expense (benefit) (1,744) 10,066 -117% 13,379 67,216 -80%
Cumulative effect of change in accounting principle (3) - - - - 65,769 -100%
Net income attributable to common shareholders 16,780 14,952 12% 72,150 187,852 -62%
Weighted average shares outstanding 335,143 283,095 18% 303,989 282,434 8%
Net income attributable to common shareholders (4) $ 0.05 $ 0.05 0% $ 0.24 $ 0.67 -64%
Other Financial Data
Total capital expenditures $ 75,611 $ 86,357 -12% $ 276,348 $ 278,015 -1%
Free cash flow (5) 127,853 112,952 13% 505,852 478,523 6%
(1) Our Vermont distribution facilities were sold on April 1, 2004. 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 1, 2003. The sales of these
properties affect the comparability of data presented.
(2) Includes $36,618 related to stock based compensation expense for the twelve
months ended December 31, 2004.
(3) Represents the effect of adoption of SFAS No. 143, net of tax.
(4) Calculated based on weighted average shares outstanding.
(5) Free cash flow excludes the charge for management succession and strategic
alternatives expenses. 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 For the year ended
December 31, December 31,
-------------------------- % --------------------------- %
(Dollars in thousands, except operating data) 2004 2003 Change 2004 2003 Change
----------------------------------- -------------------------------------
TELECOMMUNICATIONS
Select Income Statement Data
Revenue
Network access services $ 159,797 $ 163,525 -2% $ 634,196 $ 667,042 -5%
Local network services 210,719 214,491 -2% 851,177 859,002 -1%
Long distance services 44,657 47,705 -6% 183,623 199,382 -8%
Data services 37,020 28,814 28% 138,231 107,452 29%
Directory services 27,636 26,338 5% 110,623 106,934 3%
Other 26,446 24,726 7% 109,365 101,123 8%
ILEC revenue 506,275 505,599 0% 2,027,215 2,040,935 -1%
Electric Lightwave 38,753 40,161 -4% 156,030 165,389 -6%
Total revenue 545,028 545,760 0% 2,183,245 2,206,324 -1%
Expenses
Network access expense 48,534 51,731 -6% 199,643 223,547 -11%
Other operating expenses 206,599 205,773 0% 824,145 826,958 0%
Management succession and strategic alternatives
expenses (1) - - - 90,632 - 100%
Restricted stock based compensation 1,682 2,638 -36% 8,695 8,275 5%
Depreciation and amortization 143,060 154,491 -7% 572,710 595,276 -4%
Reserve for telecommunications bankruptcies - (6,637) 100% - (4,377) 100%
Restructuring and other expenses - - - - 9,687 -100%
Total expenses 399,875 407,996 -2% 1,695,825 1,659,366 2%
Operating Income
ILEC $ 139,924 $ 134,712 4% $ 477,070 $ 537,248 -11%
ELI 5,229 3,052 71% 10,350 9,710 7%
Other Financial and Operating Data
ILEC capital expenditures $ 71,846 $ 82,829 -13% $ 264,337 $ 244,089 8%
ELI capital expenditures 3,578 2,982 20% 11,644 9,496 23%
ILEC depreciation and amortization 136,900 148,776 -8% 548,649 571,766 -4%
ELI depreciation and amortization 6,160 5,715 8% 24,061 23,510 2%
ILEC access lines 2,320,772 2,386,456 -3% 2,320,772 2,386,456 -3%
High-speed internet subscribers 212,277 120,461 76% 212,277 120,461 76%
ILEC switched access minutes of use (in millions) 2,895 2,922 -1% 11,785 11,971 -2%
ILEC average monthly revenue per average RGU (2) $ 66.62 $ 67.20 -1% $ 67.04 $ 67.73 -1%
(1) See footnote (2) on 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) 2004 2003 Change 2004 2003 Change
-------------------------------------- --------------------------------------
GAS AND ELECTRIC SECTORS (1)
Select Income Statement Data
Revenue $ - $ 8,325 -100% $ 9,735 $ 238,614 -96%
Gas, electric energy and fuel oil purchased - 5,333 -100% 5,523 146,142 -96%
Other operating expenses (2) 802 4,293 -81% 7,346 66,241 -89%
Restricted stock based compensation - 194 -100% - 277 -100%
Loss on impairment - 11,300 -100% - 15,300 -100%
Operating income (loss) (802) (12,795) 94% (3,134) 10,654 -129%
Other Financial Data
Capital expenditures - 497 -100% - 23,861 -100%
(1) See footnote (1) on first page.
(2) 2004 quarterly data consists principally of post-sale activities associated
with the completion of our utility divestiture program. These costs could
not be accrued as a selling cost at the time of sale.
Citizens Communications Company
Condensed Consolidated Balance Sheet Data
(Dollars in thousands)
December 31, 2004 December 31, 2003
--------------------- --------------------
ASSETS
------
Current assets:
Cash and cash equivalents $ 167,463 $ 583,671
Accounts receivable and other current assets 282,114 299,832
Assets held for sale - 23,130
--------------------- --------------------
Total current assets 449,577 906,633
Property, plant and equipment, net 3,338,300 3,530,542
Other long-term assets 2,880,542 3,008,370
--------------------- --------------------
Total assets $ 6,668,419 $ 7,445,545
===================== ====================
LIABILITIES AND EQUITY
----------------------
Current liabilities:
Long-term debt due within one year $ 6,383 $ 88,002
Accounts payable and other current liabilities 411,137 489,624
Liabilities related to assets held for sale - 11,128
--------------------- --------------------
Total current liabilities 417,520 588,754
Deferred income taxes and other liabilities 621,661 584,729
Equity units - 460,000
Long-term debt (1) 4,266,998 4,195,629
Mandatorily Redeemable Convertible Preferred Securities - 201,250
Shareholders' equity 1,362,240 1,415,183
--------------------- --------------------
Total liabilities and equity $ 6,668,419 $ 7,445,545
===================== ====================
(1) In accordance with FASB Interpretaion No. 46R, the Mandatorily Redeemable
Convertible Preferred Securities are classified as debt effective January
1, 2004.
Citizens Communications Company
Condensed Consolidated Cash Flow Data
(Dollars in thousands)
For the year ended December 31,
------------------------------------
2004 2003
----------------- -----------------
Income before cumulative effect of change in accounting principle $ 72,150 $ 122,083
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization expense 572,710 595,276
Gain on expiration/settlement of customer advances (25,345) (6,165)
Gain on capital lease termination/restructuring - (69,512)
Stock based compensation expense 45,313 8,552
Loss on extinguishment of debt 66,480 10,851
Loss on impairment - 15,300
Other (14,233) 66,791
----------------- -----------------
Net cash provided by operating activities 717,075 743,176
Cash flows from investing activities:
Proceeds from sales of assets, net of selling expenses 30,959 388,079
Proceeds from securities sold 26,514 -
Capital expenditures (276,348) (278,015)
Other asset purchases (28,110) (1,612)
----------------- -----------------
Net cash used by investing activities (246,985) 108,452
Cash flows from financing activities:
Long-term debt borrowings 700,000 -
Debt issuance costs (15,502) -
Long-term debt payments (1,214,021) (653,462)
Premiums paid to retire debt (66,480) (10,851)
Issuance of common stock 544,562 13,209
Dividends paid (832,768) -
Other (2,089) (10,030)
----------------- -----------------
Net cash used by financing activities (886,298) (661,134)
Increase (decrease) in cash and cash equivalents (416,208) 190,494
Cash and cash equivalents at January 1, 583,671 393,177
----------------- -----------------
Cash and cash equivalents at December 31, $ 167,463 $ 583,671
================= =================
Schedule A
Reconciliation of Non-GAAP Financial Measures
For the quarter ended December 31, For the year ended December 31,
--------------------------------- ---------------------------------
(Dollars in thousands) 2004 2003 2004 2003
--------------- --------------- --------------- ---------------
Net Income Available to Common Shareholders to
----------------------------------------------
Free Cash Flow; Net Cash Provided by Operating Activities
---------------------------------------------------------
Net income available to common shareholders $ 16,780 $ 14,952 $ 72,150 $ 187,852
Add back:
Depreciation and amortization 143,060 154,491 572,710 595,276
Income tax expense (benefit) (1,744) 10,066 13,379 67,216
Management succession and strategic alternatives expenses - - 90,632 -
Restricted stock based compensation 1,682 2,832 8,695 8,552
Loss on impairment - 11,300 - 15,300
Subtract:
Cash refunded for income taxes (7,097) (4,957) (4,901) (2,532)
Investment and other income (loss), net (36,589) (711) (19,733) 54,421
Cumulative effect of change in accounting principle - - - 65,769
Capital expenditures 75,611 86,357 276,348 278,015
--------------- --------------- --------------- ---------------
Free cash flow 127,853 112,952 505,852 478,523
Add back:
Deferred income taxes (benefit), net (1,744) (24,272) 13,379 67,216
Other non-cash adjustments 60,512 22,595 98,250 (21,208)
Investment and other income/(loss) (36,589) (711) (19,733) 54,421
Cash refunded for income taxes (7,097) (4,957) (4,901) (2,532)
Capital expenditures 75,611 86,357 276,348 278,015
Subtract:
Changes in current assets and liabilities 39,867 11,067 39,414 35,491
Income tax expense (benefit) (1,744) 10,066 13,379 67,216
Management succession and strategic alternatives expenses - - 90,632 -
Restricted stock based compensation 1,682 2,832 8,695 8,552
--------------- --------------- --------------- ---------------
Net cash provided by operating activities $ 178,741 $ 167,999 $ 717,075 $ 743,176
=============== =============== =============== ===============