Exhibit 99.1
Citizens Communications
3 High Ridge Park
Stamford, CT 06905
203.614.5600
Web site: www.czn.net
FOR IMMEDIATE RELEASE:
Contact:
Brigid Smith
203.614.5042
bsmith@czn.com
Citizens Communications Reports 2006 Third-Quarter Results
Stamford, Conn., November 7, 2006 -- Citizens Communications (NYSE:CZN) today
reported third quarter 2006 revenues of $507.2 million, operating income of
$160.7 million, and net income of $128.5 million. The sale of Electric
Lightwave, LLC (ELI) for $247.0 million (including $243.0 million in cash)
closed on July 31, 2006. Excluding the after-tax gain on the sale, net income
would have been $56.4 million.
Third quarter 2006 revenue was $507.2 million, as compared to $501.2 million in
the third quarter of 2005. We experienced growth in the third quarter of 2006 in
data and internet services revenue, higher access service revenues (which
include subsidy payments we receive from federal and state agencies) and, to a
lesser extent, enhanced services/features revenues. Third quarter 2006 data and
internet services revenue increased 29.7 percent compared to the third quarter
of 2005. Revenues were negatively impacted in the third quarter of 2006 as
compared to 2005 by a decline in local, long distance and equipment sales. In
the third quarter of 2005, a missed filing deadline with the Universal Service
Fund (USF) resulted in the postponement of the recognition of approximately
$10.0 million of subsidy revenue until the fourth quarter of 2005.
Other operating expenses decreased by approximately $8.0 million or 4.2 percent,
as compared to the third quarter of 2005 primarily driven by reductions in
salaries and benefits, which included a $3.0 million accrual for severance in
2005 and improved expense control in benefit costs.
Depreciation and amortization expense for the third quarter of 2006 decreased
$11.9 million or 9.2 percent as compared to the third 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.
The company added approximately 12,300 high-speed internet customers during the
quarter and had more than 362,000 high-speed data subscribers at September 30,
2006. The number of the company's high-speed internet subscribers has increased
by more than 72,000 or 25.0 percent since September 30, 2005.
Operating income for the third quarter of 2006 was $160.7 million and operating
income margin was 31.7 percent, compared to $136.9 million and 27.3 percent in
the third quarter of 2005. Capital expenditures were $65.1 million for the third
quarter of 2006 and $163.4 million for the first nine months of 2006.
--MORE --
Free cash flow for the third quarter increased 3.0 percent to $127.6 million
compared to the third quarter of 2005. The company's dividend represents a
payout of 56.6 percent of free cash flow for the first nine months 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
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.
--MORE --
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 complete
the acquisition of Commonwealth Telephone Enterprises, Inc., to successfully
integrate their operations and to realize the synergies from the acquisition;
our ability to refinance the bridge loan that will be used to finance the cash
portion of the merger consideration with long-term debt; 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.
Additional Information and Where to Find It
This material is not a substitute for the prospectus/proxy statement Citizens
Communications Company and Commonwealth Telephone Enterprises, Inc. will file
with the Securities and Exchange Commission. Investors are urged to read the
prospectus/proxy statement, which will contain important information, including
detailed risk factors, when it becomes available. The prospectus/proxy statement
and other documents that will be filed by Citizens Communications Company and
Commonwealth Telephone Enterprises, Inc. with the Securities and Exchange
Commission will be available free of charge at the SEC's website, www.sec.gov,
or by directing a request when such a filing is made to Citizens Communications
Company, 3 High Ridge Park, Stamford, CT 06905, Attention: Investor Relations;
or to Commonwealth Telephone Enterprises, Inc., 100 CTE Drive, Dallas,
Pennsylvania 18612, Attention: Investor Relations. The final prospectus/proxy
statement will be mailed to shareholders of Commonwealth Telephone Enterprises,
Inc.
This communication shall not constitute an offer to sell or the solicitation of
an offer to buy securities, nor shall there be any sale of securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of such jurisdiction.
Citizens Communications Company and Commonwealth Telephone Enterprises, Inc.,
and certain of their respective directors, executive officers and other members
of management and employees are participants in the solicitation of proxies in
connection with the proposed transactions. Information about the directors and
executive officers of Citizens Communications Company is set forth in the proxy
statement for Citizens Communications Company's 2006 annual meeting of
shareholders. Information about the directors and executive officers of
Commonwealth Telephone Enterprises, Inc. is set forth in the proxy statement for
Commonwealth Telephone Enterprises, Inc.'s 2006 annual meeting of shareholders.
Investors may obtain additional information regarding the interests of such
participants in the proposed transactions by reading the prospectus/proxy
statement for such proposed transactions when it becomes available.
###
TABLES TO FOLLOW
Citizens Communications Company
Consolidated Financial Data (1)
(unaudited)
For the quarter ended For the nine months ended
September 30, September 30,
-------------------------- % ---------------------------- %
(Amounts in thousands - except per-share amounts) 2006 2005 Change 2006 2005 Change
---------------------------------- ----------------------------------------
Income Statement Data
Revenue $ 507,198 $ 501,211 1% $1,520,971 $1,499,678 1%
Cost of services (exclusive of depreciation and
amortization) 42,791 41,281 4% 121,411 116,598 4%
Other operating expenses 184,054 192,027 -4% 545,519 557,466 -2%
Stock based compensation 2,624 2,052 28% 7,960 6,433 24%
Depreciation and amortization 117,009 128,931 -9% 358,564 395,499 -9%
Operating income 160,720 136,920 17% 487,517 423,682 15%
Investment and other income (loss), net 4,362 6,019 -28% 68,373 10,560 547%
Interest expense (includes interest on convertible
debt) 82,186 85,219 -4% 252,920 253,009 0%
Income tax expense 31,562 22,514 40% 112,903 65,055 74%
Income from discontinued operations, net of tax (2) 77,125 3,170 2333% 90,577 9,416 862%
Net income attributable to common shareholders 128,459 38,376 235% 280,644 125,594 123%
Weighted average shares outstanding 319,891 338,928 -6% 323,160 339,027 -5%
Basic net income per share attributable to common
shareholders (3) $ 0.40 $ 0.11 264% $ 0.87 $ 0.37 135%
Other Financial Data
Capital expenditures $ 65,072 $ 57,347 13% $ 163,356 $ 166,367 -2%
Free cash flow (4) 127,636 123,940 3% 429,435 404,003 6%
(1) In February 2006, we entered into a definitive agreement to sell Electric
Lightwave, LLC (ELI), our competitive local exchange carrier business. ELI
was sold on July 31, 2006. 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) For the period ended September 30, 2006, income from discontinued
operations includes ELI's after-tax gain of approximately $72.1 million.
(3) Calculated based on weighted average shares outstanding.
(4) 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 nine months ended
September 30, September 30,
--------------------------- % -------------------------- %
(Amounts in thousands, except operating data) 2006 2005 Change 2006 2005 Change
----------------------------------- -----------------------------------
TELECOMMUNICATIONS
Select Income Statement Data
Revenue
Local services $ 203,036 $ 208,601 -3% $ 609,855 $ 624,280 -2%
Access services (2) 154,838 145,417 6% 469,387 453,895 3%
Long distance services 38,927 43,003 -9% 116,779 129,090 -10%
Data and internet services 59,410 45,806 30% 164,256 126,807 30%
Directory services 28,371 28,363 0% 85,715 84,867 1%
Other 22,616 30,021 -25% 74,979 80,739 -7%
Total revenue 507,198 501,211 1% 1,520,971 1,499,678 1%
Expenses
Network access expense 42,791 41,281 4% 121,411 116,598 4%
Other operating expenses 184,054 192,027 -4% 545,519 557,466 -2%
Stock based compensation 2,624 2,052 28% 7,960 6,433 24%
Depreciation and amortization 117,009 128,931 -9% 358,564 395,499 -9%
Total expenses 346,478 364,291 -5% 1,033,454 1,075,996 -4%
Operating Income $ 160,720 $ 136,920 17% $ 487,517 $ 423,682 15%
Other Financial and Operating Data
Access lines 2,132,868 2,245,088 -5% 2,132,868 2,245,088 -5%
High-speed internet subscribers 362,698 290,228 25% 362,698 290,228 25%
Switched access minutes of use (in millions) 2,560 2,808 -9% 7,793 8,520 -9%
Average monthly revenue per average access line $ 78.71 $ 73.92 6% $ 77.66 $ 72.99 6%
Average monthly revenue per average RGU (3) $ 67.52 $ 65.80 3% $ 67.25 $ 65.76 2%
(1) See footnote (1) on the first page.
(2) For the period ended September 30, 2005, access services did not include
approximately $10.0 million of USF subsidy revenue due to a late filing.
(3) RGUs are access lines plus high-speed internet subscribers.
Citizens Communications Company
Condensed Consolidated Balance Sheet Data (1)
(Amounts in thousands)
(unaudited)
September 30, 2006 December 31, 2005
--------------------- --------------------
ASSETS
------
Current assets:
Cash and cash equivalents $ 417,105 $ 268,917
Accounts receivable and other current assets 230,970 243,270
Assets of discontinued operations 9,622 162,716
--------------------- --------------------
Total current assets 657,697 674,903
Property, plant and equipment, net 2,962,604 3,058,312
Other long-term assets 2,595,292 2,699,520
--------------------- --------------------
Total assets $ 6,215,593 $ 6,432,735
===================== ====================
LIABILITIES AND EQUITY
----------------------
Current liabilities:
Long-term debt due within one year $ 37,774 $ 227,693
Accounts payable and other current liabilities 346,194 372,968
Liabilities of discontinued operations - 46,266
--------------------- --------------------
Total current liabilities 383,968 646,927
Deferred income taxes and other liabilities 900,685 748,869
Long-term debt 3,947,664 3,995,130
Stockholders' equity 983,276 1,041,809
--------------------- --------------------
Total liabilities and equity $ 6,215,593 $ 6,432,735
===================== ====================
(1) See footnote (1) on the first page.
Citizens Communications Company
Condensed Consolidated Cash Flow Data (1)
(unaudited)
(Amounts in thousands)
For the nine months ended September 30,
---------------------------------------
2006 2005
----------------- ------------------
Cash flows provided by (used in) operating activities:
Net income $ 280,644 $ 125,594
Deduct: Gain on sale of discontinued operations (72,079) (1,167)
Income from discontinued operations (18,498) (8,249)
Adjustments to reconcile income to net cash provided
by operating activities:
Depreciation and amortization expense 358,564 395,499
Gain on expiration/settlement of customer advances - (492)
Loss on debt exchange - 3,175
Stock based compensation 7,960 6,433
Other 17,207 62,484
----------------- ------------------
Net cash provided by continuing operating activities 573,798 583,277
Cash flows from investing activities:
Proceeds from sales of assets, net of selling expenses - 24,195
Proceeds from sale of discontinued operations 247,284 43,565
Securities sold - 1,112
Capital expenditures (163,356) (166,367)
Other assets (purchased) distributions received, net 63,757 (3,667)
----------------- ------------------
Net cash provided (used) by investing activities 147,685 (101,162)
Cash flows from financing activities:
Long-term debt payments (227,461) (6,093)
Issuance of common stock 21,394 46,739
Dividends paid (243,115) (255,327)
Shares repurchased (135,239) (161,898)
Other (114) (1,720)
----------------- ------------------
Net cash used by financing activities (584,535) (378,299)
Cash flows of discontinued operations:
Operating activities 17,833 25,054
Investing activities (6,593) (9,685)
Financing activities - (80)
----------------- ------------------
11,240 15,289
Increase in cash and cash equivalents 148,188 119,105
Cash and cash equivalents at January 1, 268,917 171,797
----------------- ------------------
Cash and cash equivalents at September 30, $ 417,105 $ 290,902
================= ==================
Cash paid during the period for:
Interest $ 264,621 $ 244,395
Income taxes $ 8,330 $ 2,235
(1) See footnote (1) on the first page.
Schedule A
Reconciliation of Non-GAAP Financial Measures (1)
For the quarter ended September 30, For the nine months ended September 30,
--------------------------------------- -----------------------------------------
(Amounts in thousands) 2006 2005 2006 2005
-------------------- ----------------- ------------------ ----------------------
Net Income to Free Cash Flow;
-----------------------------
Net Cash Provided by Operating Activities
-----------------------------------------
Net income $ 128,459 $ 38,376 $ 280,644 $ 125,594
Add back:
Depreciation and amortization 117,009 128,931 358,564 395,499
Income tax expense 31,562 22,514 112,903 65,055
Stock based compensation 2,624 2,052 7,960 6,433
Subtract:
Cash paid for income taxes 5,459 1,397 8,330 2,235
Investment and other income (loss), net 4,362 6,019 68,373 10,560
Capital expenditures 65,072 57,347 163,356 166,367
Income from discontinued operations 77,125 3,170 90,577 9,416
----------------- ----------------- ------------------ ------------------
Free cash flow 127,636 123,940 429,435 404,003
Add back:
Deferred income taxes 25,740 10,242 103,893 55,101
Noncash (gains)/losses, net 5,093 7,007 15,493 18,841
Investment and other income (loss), net 4,362 6,019 6,945 10,560
Cash paid for income taxes 5,459 1,397 8,330 2,235
Capital expenditures 65,072 57,347 163,356 166,367
Subtract:
Changes in current assets and liabilities (3,953) 458 32,791 2,342
Income tax expense 31,562 22,514 112,903 65,055
Stock based compensation 2,624 2,052 7,960 6,433
----------------- ----------------- ------------------ ------------------
Net cash provided by operating activities $ 203,129 $ 180,928 $ 573,798 $ 583,277
================= ================= ================== ==================
(1) See footnote (1) on the first page.