Exhibit 99.1
Citizens Communications
3 High Ridge Park
Stamford, CT 06905
203.614.5600
Web site: www.czn.net
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FOR IMMEDIATE RELEASE:
Contact:
Michael Bromley
203.614.5218
mbromley@czn.com
Citizens Communications Reports 2006 First-Quarter Results
Stamford, Conn., May 3, 2006 -- Citizens Communications (NYSE:CZN) today
reported first quarter 2006 revenues of $506.9 million; operating income of
$157.3 million; and net income of $50.5 million. The results of Electric
Lightwave are classified as discontinued operations and therefore are not
reflected in revenue or operating income.
First quarter 2006 revenue increased 1.0 percent compared to the first quarter
of 2005. The increase is due primarily to growth in data and internet services
revenue and higher access service. Data and internet services revenue increased
30.4 percent compared to the first quarter of 2005.
Operating expenses included a pre-tax charge of $3.7 million for severance
payments associated with an early retirement program offered to certain
employees during the first quarter of 2006. The program resulted in the
reduction of 62 employees. The company expects to realize annualized cost
savings of approximately $3.9 million from this headcount reduction.
Depreciation expense for the first quarter of 2006 decreased $12.1 million as
compared to the first quarter of 2005. The decrease is due to a declining asset
base and changes in the remaining useful lives of certain assets as determined
by an independent study. We expect that our depreciation expense will decline in
2006 to approximately $350.0 million or by 11 percent compared to 2005.
The company added 19,400 high-speed internet customers during the quarter and
had 330,800 high-speed data subscribers at March 31, 2006. The number of the
company's high-speed internet subscribers has increased by more than 88,000 or
36.3 percent from a year ago.
Operating income for the first quarter of 2006 was $157.3 million and operating
income margin was 31.0 percent, compared to $144.5 million and 28.8 percent in
the first quarter of 2005. Capital expenditures for the Frontier operations were
$43.8 million for the first quarter of 2006.
--MORE --
Free cash flow was $159.5 million during the first quarter of 2006. The
company's dividend represents a payout of 51.8 percent of first quarter 2006
free cash flow.
During the first quarter, the company repurchased $37.9 million or 2,802,900
shares of its common stock and exchanged $47.5 million of debt due in 2008 for
debt that matures in 2031.
The company received approximately $64.6 million in cash upon the liquidation of
the Rural Telephone Bank during April 2006. In addition, the previously
announced sale of Electric Lightwave, LLC (ELI) for $247.0 million (including
$243.0 million in cash) is expected to close during the third quarter of 2006.
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
--MORE --
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.
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 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. In addition, we may be unable to implement some
of our current business initiatives if we fail to recognize the benefits we
expect to receive from certain transactions, including but not limited to, the
anticipated sale of ELI and the liquidation of Rural Telephone Bank. 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. We undertake no obligation to publicly update or revise
any forward-looking statement or to make any other forward-looking statements,
whether as a result of new information, future events or otherwise unless
required to do so by securities laws.
###
TABLES TO FOLLOW
Citizens Communications Company
Consolidated Financial Data (1)
(unaudited)
For the quarter ended
-----------------------------------------------------
March 31, March 31, %
(Amounts in thousands, except per-share amounts) 2006 2005 Change
--------------- --------------- ----------------
Income Statement Data
Revenue $ 506,861 $ 502,334 1%
Cost of services (exclusive of depreciation and amortization) 40,218 39,722 1%
Other operating expenses 184,624 181,772 2%
Stock based compensation 2,677 2,265 18%
Depreciation and amortization 122,004 134,094 -9%
Operating income 157,338 144,481 9%
Investment and other income (loss), net (1,351) 3,968 -134%
Interest expense (includes interest on convertible debt) 85,393 83,725 2%
Income tax expense 26,607 25,216 6%
Income from discontinued operations, net of tax 6,496 3,126 108%
Net income attributable to common shareholders 50,483 42,634 18%
Weighted average shares outstanding 327,132 338,450 -3%
Basic net income per share attributable to common shareholders (2) $ 0.15 $ 0.13 15%
Other Financial Data
Capital expenditures $ 43,765 $ 49,414 -11%
Free cash flow (3) 159,490 152,686 4%
(1) In February 2006, we entered into a definitive agreement to sell Electric
Lightwave, LLC (ELI), our competitive local exchange carrier business.
Additionally, our conferencing business was sold on March 15, 2005. Prior
periods have been restated to present ELI and our conferencing business as
discontinued operations and to reflect the consolidation of Mohave Cellular
Limited Partnership in accordance with EITF No. 04-5.
(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.
Citizens Communications Company
Financial and Operating Data (1)
(unaudited)
For the quarter ended
----------------------------------------------
March 31, March 31, %
(Amounts in thousands, except operating data) 2006 2005 Change
--------------- -------------- ---------
TELECOMMUNICATIONS
Select Income Statement Data
Revenue
Access services $ 160,968 $ 156,824 3%
Local services 203,566 209,957 -3%
Long distance services 39,158 43,750 -10%
Data and internet services 50,358 38,609 30%
Directory services 28,797 27,963 3%
Other 24,014 25,231 -5%
Total revenue 506,861 502,334 1%
Expenses
Network access expense 40,218 39,722 1%
Other operating expenses 184,624 181,772 2%
Stock based compensation 2,677 2,265 18%
Depreciation and amortization 122,004 134,094 -9%
Total expenses 349,523 357,853 -2%
Operating Income
Frontier $ 157,338 $ 144,481 9%
Other Financial and Operating Data
Frontier capital expenditures $ 43,758 $ 49,357 -11%
Frontier access lines 2,192,265 2,298,510 -5%
Frontier high-speed internet subscribers 330,832 242,768 36%
Frontier switched access minutes of use (in millions) 2,654 2,882 -8%
Frontier average monthly revenue per average access line $ 76.62 $ 72.49 6%
Frontier average monthly revenue per average RGU (2) $ 66.86 $ 66.00 1%
(1) See footnote (1) on the first page.
(2) RGUs are access lines plus high-speed internet subscribers.
Citizens Communications Company
Condensed Consolidated Balance Sheet Data (1)
(Dollars in thousands) (unaudited)
March 31, 2006 December 31, 2005
------------------- -------------------
ASSETS
------
Current assets:
Cash and cash equivalents $ 284,437 $ 268,917
Accounts receivable and other current assets 233,608 253,634
Assets of discontinued operations 159,868 162,716
------------------- -------------------
Total current assets 677,913 685,267
Property, plant and equipment, net 3,011,649 3,058,312
Other long-term assets 2,654,554 2,689,156
------------------- -------------------
Total assets $ 6,344,116 $ 6,432,735
=================== ===================
LIABILITIES AND EQUITY
----------------------
Current liabilities:
Long-term debt due within one year $ 227,695 $ 227,693
Accounts payable and other current liabilities 321,099 372,968
Liabilities of discontinued operations 43,065 46,266
------------------- -------------------
Total current liabilities 591,859 646,927
Deferred income taxes and other liabilities 782,902 748,869
Long-term debt 3,975,470 3,995,130
Shareholders' equity 993,885 1,041,809
------------------- -------------------
Total liabilities and equity $ 6,344,116 $ 6,432,735
=================== ===================
(1) See footnote (1) on the first page.
Citizens Communications Company
Condensed Consolidated Cash Flow Data (1)
(unaudited)
(Dollars in thousands)
For the three months ended March 31,
---------------------------------------
2006 2005
----------------- --------------------
Cash flows provided by (used in) operating activities:
Net income $ 50,483 $ 42,634
Deduct: Gain on sale of discontinued operations - (1,167)
Income from discontinued operations (6,496) (1,959)
Adjustments to reconcile income to net cash provided
by operating activities:
Depreciation and amortization expense 122,004 134,094
Gain on expiration/settlement of customer advances - (80)
Stock based compensation 2,677 2,265
Other (4,055) 20,809
----------------- --------------------
Net cash provided by continuing operating activities 164,613 196,596
Cash flows from investing activities:
Proceeds from sales of assets, net of selling expenses - 1,112
Proceeds from sale of discontinued operations - 43,565
Capital expenditures (43,765) (49,414)
Other assets (purchased) distributions received, net 324 (1,103)
----------------- --------------------
Net cash used by investing activities (43,441) (5,840)
Cash flows from financing activities:
Debt issuance costs - (385)
Long-term debt payments (240) (259)
Issuance of common stock 9,452 5,552
Dividends paid (82,633) (85,081)
Shares repurchased (37,916) -
Other (473) (1,237)
----------------- --------------------
Net cash used by financing activities (111,810) (81,410)
Cash flows of discontinued operations:
Operating activities 8,580 8,458
Investing activities (2,422) (2,776)
Financing activities - (48)
----------------- --------------------
6,158 5,634
Increase in cash and cash equivalents 15,520 114,980
Cash and cash equivalents at January 1, 268,917 171,797
----------------- --------------------
Cash and cash equivalents at March 31, $ 284,437 $ 286,777
================= ====================
Cash paid during the period for:
Interest $ 95,079 $ 71,336
Income taxes (refunds) $ (133) $ (1,859)
(1) See footnote (1) on the first page.
Schedule A
Reconciliation of Non-GAAP Financial Measures (1)
(unaudited)
For the quarter ended March 31,
-----------------------------------------
(Dollars in thousands) 2006 2005
------------------- ------------------
Net Income to Free Cash Flow;
-----------------------------
Net Cash Provided by Operating Activities
-----------------------------------------
Net income $ 50,483 $ 42,634
Add back:
Depreciation and amortization 122,004 134,094
Income tax expense 26,607 25,216
Stock based compensation 2,677 2,265
Subtract:
Cash refunded for income taxes (133) (1,859)
Investment and other income (loss), net (1,351) 3,968
Capital expenditures 43,765 49,414
------------------- ------------------
Free cash flow 159,490 152,686
Add back:
Deferred income taxes 24,163 25,109
Noncash (gains)/losses, net 7,039 2,564
Investment and other income (loss), net (1,351) 3,968
Cash refunded for income taxes (133) (1,859)
Capital expenditures 43,765 49,414
Subtract:
Changes in current assets and liabilities 32,580 4,679
Income tax expense 26,607 25,216
Stock based compensation 2,677 2,265
Gain on sale of discontinued operations - 1,167
Income from discontinued operations 6,496 1,959
------------------- ------------------
Net cash provided by operating activities $ 164,613 $ 196,596
=================== ==================
(1) See footnote (1) on the first page.