Exhibit 99.2
Citizens Communications
3 High Ridge Park
Stamford, CT 06905
203.614.5600
Web site: www.czn.net
- --------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE:
Contact:
Michael Bromley
203.614.5218
mbromley@czn.com
Citizens Communications Reports 2006 Second-Quarter Results
Stamford, Conn., August 2, 2006 -- Citizens Communications (NYSE:CZN) today
reported second quarter 2006 revenues of $506.9 million, operating income of
$169.5 million, and net income of $101.7 million. During the quarter, the
company received approximately $65 million in cash upon the liquidation of the
Rural Telephone Bank. Excluding the effects of the Rural Telephone Bank
liquidation, net income would have been $63.0 million.
Second quarter 2006 revenue increased 2.2 percent compared to the second quarter
of 2005. The increase is due primarily to growth in data and internet services
revenue and to a lesser extent higher access services revenues and higher
enhanced services/features revenues. Data and internet services revenue
increased 28.5 percent compared to the second quarter of 2005.
Other operating expense decreased by approximately $6.8 million or 3.7 percent
primarily driven by reductions in salaries and benefits as the company has 340
fewer employees and improved expense control in benefit costs.
Depreciation expense for the second quarter of 2006 decreased $12.9 million as
compared to the second quarter of 2005. The decrease is due to a declining asset
base and changes in the projected useful lives of certain assets as determined
by an independent study prepared last year. Depreciation expense is expected to
decline in 2006 to approximately $350.0 million or by 11 percent compared to
2005.
The company added 19,600 high-speed internet customers during the quarter and
had over 350,000 high-speed data subscribers at June 30, 2006. The number of the
company's high-speed internet subscribers has increased by more than 83,000 or
31.1 percent since June 30, 2005.
Operating income for the second quarter of 2006 was $169.5 million and operating
income margin was 33.4 percent, compared to $142.3 million and 28.7 percent in
the second quarter of 2005. Capital expenditures were $54.5 million for the
second quarter of 2006 and $98.3 million for the first six months of 2006.
Free cash flow for the second quarter increased 17 percent to $155.8 million
compared to the second quarter of 2005. The company's dividend represents a
payout of 51.6 percent of free cash flow for the first six months of 2006.
--MORE --
During the second quarter, the company repurchased $97.3 million of stock at an
average price of $13.16. In addition, during the second quarter, the company
retired at par $175 million of debentures due on June 1, 2006 and repurchased
$22.7 million of its notes due August 17, 2006.
As previously announced, the sale of Electric Lightwave, LLC (ELI) for $247
million (including $243 million in cash) closed on July 31, 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.
--MORE --
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 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. 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 filing. 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 For the six months ended
June 30, June 30,
------------------------- % --------------------------- %
(Amounts in thousands - except per-share amounts) 2006 2005 Change 2006 2005 Change
----------------------------------- --------------------------------------
Income Statement Data
Revenue $ 506,912 $ 496,133 2% $ 1,013,773 $ 998,467 2%
Cost of services (exclusive of depreciation and
amortization) 38,402 35,595 8% 78,620 75,317 4%
Other operating expenses 176,842 183,667 -4% 361,466 365,439 -1%
Stock based compensation 2,658 2,116 26% 5,335 4,381 22%
Depreciation and amortization 119,552 132,474 -10% 241,556 266,568 -9%
Operating income 169,458 142,281 19% 326,796 286,762 14%
Investment and other income (loss), net 65,363 573 - 64,012 4,541 -
Interest expense (includes interest on convertible
debt) 85,341 84,065 2% 170,734 167,790 2%
Income tax expense 54,734 17,326 216% 81,341 42,542 91%
Income from discontinued operations, net of tax 6,956 3,121 123% 13,452 6,247 115%
Net income attributable to common shareholders 101,702 44,584 128% 152,185 87,218 74%
Weighted average shares outstanding 322,337 340,389 -5% 324,501 339,484 -4%
Basic net income per share attributable to common
shareholders (2) $ 0.32 $ 0.13 146% $ 0.47 $ 0.26 81%
Other Financial Data
Capital expenditures $ 54,519 $ 59,606 -9% $ 98,284 $ 109,020 -10%
Free cash flow (3) 155,760 133,624 17% 315,250 286,310 10%
(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 For the six months ended
June 30, June 30,
--------------------------- % -------------------------- %
(Amounts in thousands, except operating data) 2006 2005 Change 2006 2005 Change
-------------------------------------- ------------------------------------
TELECOMMUNICATIONS
Select Income Statement Data
Revenue
Access services $ 153,582 $ 151,654 1% $ 314,550 $ 308,478 2%
Local services 203,254 205,722 -1% 406,820 415,679 -2%
Long distance services 38,692 42,337 -9% 77,850 86,087 -10%
Data and internet services 54,488 42,392 29% 104,846 81,001 29%
Directory services 28,547 28,541 0% 57,344 56,504 1%
Other 28,349 25,487 11% 52,363 50,718 3%
Total revenue 506,912 496,133 2% 1,013,773 998,467 2%
Expenses
Network access expense 38,402 35,595 8% 78,620 75,317 4%
Other operating expenses 176,842 183,667 -4% 361,466 365,439 -1%
Stock based compensation 2,658 2,116 26% 5,335 4,381 22%
Depreciation and amortization 119,552 132,474 -10% 241,556 266,568 -9%
Total expenses 337,454 353,852 -5% 686,977 711,705 -3%
Operating Income $ 169,458 $ 142,281 19% $ 326,796 $ 286,762 14%
Other Financial and Operating Data
Access lines 2,162,712 2,275,465 -5% 2,162,712 2,275,465 -5%
High-speed internet subscribers 350,411 267,270 31% 350,411 267,270 31%
Switched access minutes of use (in millions) 2,579 2,830 -9% 5,233 5,712 -8%
Average monthly revenue per average access line $ 77.62 $ 72.31 7% $ 77.12 $ 72.42 6%
Average monthly revenue per average RGU (2) $ 67.11 $ 65.06 3% $ 67.00 $ 65.57 2%
(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)
June 30, 2006 December 31, 2005
--------------------- --------------------
ASSETS
------
Current assets:
Cash and cash equivalents $ 141,316 $ 268,917
Accounts receivable and other current assets 232,452 243,270
Assets of discontinued operations 162,915 162,716
--------------------- --------------------
Total current assets 536,683 674,903
Property, plant and equipment, net 2,978,064 3,058,312
Other long-term assets 2,630,550 2,699,520
--------------------- --------------------
Total assets $ 6,145,297 $ 6,432,735
===================== ====================
LIABILITIES AND EQUITY
----------------------
Current liabilities:
Long-term debt due within one year $ 47,683 $ 227,693
Accounts payable and other current liabilities 334,052 372,968
Liabilities of discontinued operations 44,348 46,266
--------------------- --------------------
Total current liabilities 426,083 646,927
Deferred income taxes and other liabilities 844,260 748,869
Long-term debt 3,950,556 3,995,130
Stockholders' equity 924,398 1,041,809
--------------------- --------------------
Total liabilities and equity $ 6,145,297 $ 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 six months ended June 30,
----------------------------------
2006 2005
---------------- ----------------
Cash flows provided by (used in) operating activities:
Net income $ 152,185 $ 87,218
Deduct: Gain on sale of discontinued operations - (1,167)
Income from discontinued operations (13,452) (5,080)
Adjustments to reconcile income to net cash provided
by operating activities:
Depreciation and amortization expense 241,556 266,568
Gain on expiration/settlement of customer advances - (668)
Loss on debt exchange - 3,175
Stock based compensation 5,335 4,381
Other (5,155) 47,921
---------------- ----------------
Net cash provided by continuing operating activities 380,469 402,348
Cash flows from investing activities:
Proceeds from sales of assets, net of selling expenses - 25,307
Proceeds from sale of discontinued operations - 43,565
Capital expenditures (98,284) (109,020)
Other assets (purchased) distributions received, net 62,244 (4,667)
---------------- ----------------
Net cash used by investing activities (36,040) (44,815)
Cash flows from financing activities:
Long-term debt payments (198,126) (5,876)
Issuance of common stock 12,756 24,953
Dividends paid (162,773) (171,022)
Shares repurchased (135,239) (14,587)
Other 17 (1,645)
---------------- ----------------
Net cash used by financing activities (483,365) (168,177)
Cash flows of discontinued operations:
Operating activities 16,880 17,095
Investing activities (5,545) (5,700)
Financing activities - (48)
---------------- ----------------
11,335 11,347
Increase in cash and cash equivalents (127,601) 200,703
Cash and cash equivalents at January 1, 268,917 171,797
---------------- ----------------
Cash and cash equivalents at June 30, $ 141,316 $ 372,500
================ ================
Cash paid during the period for:
Interest $ 169,841 $ 143,436
Income taxes $ 2,871 $ 838
(1) See footnote (1) on the first page.
Schedule A
Reconciliation of Non-GAAP Financial Measures (1)
For the quarter ended June 30, For the six months ended June 30,
----------------------------------- --------------------------------------
(Amounts in thousands) 2006 2005 2006 2005
---------------- ---------------- ------------------ ------------------
Net Income to Free Cash Flow;
-----------------------------
Net Cash Provided by Operating Activities
-----------------------------------------
Net income $ 101,702 $ 44,584 $ 152,185 $ 87,218
Add back:
Depreciation and amortization 119,552 132,474 241,556 266,568
Income tax expense 54,734 17,326 81,341 42,542
Stock based compensation 2,658 2,116 5,335 4,381
Subtract:
Cash paid for income taxes 3,004 2,697 2,871 838
Investment and other income (loss), net 65,363 573 64,012 4,541
Capital expenditures 54,519 59,606 98,284 109,020
---------------- ---------------- ------------------ ------------------
Free cash flow 155,760 133,624 315,250 286,310
Add back:
Deferred income taxes 53,990 19,750 78,153 44,859
Noncash (gains)/losses, net 3,361 9,270 10,400 11,834
Investment and other income (loss), net 3,935 573 2,584 4,541
Cash paid for income taxes 3,004 2,697 2,871 838
Capital expenditures 54,519 59,606 98,284 109,020
Subtract:
Changes in current assets and liabilities (5,635) (2,795) 26,945 1,884
Income tax expense 54,734 17,326 81,341 42,542
Stock based compensation 2,658 2,116 5,335 4,381
Gain on sale of discontinued operations - - - 1,167
Income from discontinued operations 6,956 3,121 13,452 5,080
---------------- ---------------- ------------------ ------------------
Net cash provided by operating activities $ 215,856 $ 205,752 $ 380,469 $ 402,348
================ ================ ================== ==================
(1) See footnote (1) on the first page.