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 2006 Fourth-Quarter Results;
Announces New Stock Buyback Program
Stamford, Conn., February 27, 2007 -- Citizens Communications (NYSE:CZN) today
reported fourth quarter 2006 revenues of $504.4 million, operating income of
$157.0 million, and net income of $63.9 million.
Fourth quarter 2006 revenue was $504.4 million, as compared to $517.4 million in
the fourth quarter of 2005. We experienced 13.5 percent growth in data and
internet services revenue in the fourth quarter of 2006, compared to the fourth
quarter of 2005. Revenues were lower in the fourth quarter of 2006 as compared
to 2005 due to declines in access service revenues (which include subsidy
payments we receive from federal and state agencies) and local, long distance
and equipment sales. The fourth quarter of 2005 included approximately $10.0
million of subsidy revenue recorded during that quarter in access service
revenues, arising from a missed filing deadline with the Universal Service Fund
(USF) in the third quarter of 2005.
Other operating expenses for the fourth quarter of 2006 decreased by
approximately $7.9 million or 4.3 percent, as compared to the fourth quarter of
2005 primarily driven by reductions in employees and improved expense control in
benefit costs.
Depreciation and amortization expense for the fourth quarter of 2006 decreased
$6.8 million or 5.4 percent as compared to the fourth quarter of 2005. The
decrease is primarily due to a declining net asset base.
The company added approximately 19,700 high-speed internet customers during the
quarter and had more than 393,000 high-speed data subscribers at December 31,
2006. The number of the company's high-speed internet subscribers has increased
by more than 75,000 or 23.6 percent since the beginning of 2006.
Operating income for the fourth quarter of 2006 was $157.0 million and operating
income margin was 31.1 percent, compared to $165.3 million and 31.9 percent in
the fourth quarter of 2005. Capital expenditures were $105.5 million for the
fourth quarter of 2006 and $268.8 million for the year.
Free cash flow for the fourth quarter was $91.7 million and $539.6 million for
the full year. The company's dividend represents a payout of 60 percent of free
cash flow for the year.
--MORE --
"We delivered a strong fourth quarter capping a year of solid results for 2006.
Product revenue growth coupled with disciplined expense control generated a
54.5% operating cash flow margin for the quarter and a 55.3% operating cash flow
margin for the year," said Maggie Wilderotter, Chairman and CEO of Citizens.
"Our innovative Q4 promotions drove penetration levels for all voice, data and
video product bundles."
The company's Board of Directors has authorized a new share repurchase program.
Under the new program, up to $250 million of common stock may be repurchased
over the next 12 months. The new stock repurchase program could result in the
repurchase of up to 5 percent of the company's common stock.
The Company expects to spend between $270 million and $280 million in capital
expenditures in 2007. Our free cash flow for 2007 is estimated to be between
$425 million and $450 million. Both of these 2007 estimates exclude the impact
of the pending acquisition of Commonwealth Telephone Enterprises.
The company's next regular quarterly cash dividend of $0.25 per share will be
paid on March 30, 2007 to shareholders of record on March 9, 2007. The company
expects that dividends paid to stockholders in 2007 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 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 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.
###
TABLES TO FOLLOW
Citizens Communications Company
Consolidated Financial Data (1)
(unaudited)
For the quarter ended For the year ended
December 31, December 31,
-------------------------- % -------------------------- %
(Amounts in thousands - except per-share amounts) 2006 2005 Change 2006 2005 Change
------------------------------------ ------------------------------------
Income Statement Data
Revenue $ 504,396 $ 517,363 -3% $2,025,367 $2,017,041 0%
Cost of services (exclusive of depreciation and
amortization) 49,836 40,224 24% 171,247 156,822 9%
Other operating expenses 177,284 185,154 -4% 722,803 742,620 -3%
Stock based compensation 2,380 1,994 19% 10,340 8,427 23%
Depreciation and amortization 117,923 124,705 -5% 476,487 520,204 -8%
Operating income 156,973 165,286 -5% 644,490 588,968 9%
Investment and other income (loss), net 14,070 2,419 482% 82,443 12,979 535%
Interest expense (includes interest on convertible
debt) 83,526 85,726 -3% 336,446 338,735 -1%
Income tax expense 23,576 10,215 131% 136,479 75,270 81%
Income (loss) from discontinued operations, net of
tax(2) (30) 5,017 -101% 90,547 14,433 527%
Net income attributable to common shareholders 63,911 76,781 -17% 344,555 202,375 70%
Weighted average shares outstanding 320,774 331,180 -3% 322,641 337,065 -4%
Basic net income per share attributable to common
shareholders (3) $ 0.20 $ 0.23 -13% $ 1.07 $ 0.60 78%
Other Financial Data
Capital expenditures $ 105,450 $ 93,081 13% $ 268,806 $ 259,448 4%
Free cash flow (4) 91,679 115,719 -21% 539,612 527,971 2%
Dividends paid 80,556 83,037 -3% 323,671 338,364 -4%
Dividends payout ratio (5) 88% 72% 22% 60% 64% -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 year ended December 31, 2006, income from discontinued operations
includes ELI's after-tax gain of approximately $71.6 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.
(5) Represents dividends paid divided by free cash flow.
Citizens Communications Company
Financial and Operating Data (1)
(unaudited)
For the quarter ended For the year ended
December 31, December 31,
--------------------------- % -------------------------- %
(Amounts in thousands, except operating data) 2006 2005 Change 2006 2005 Change
-------------------------------------- ------------------------------------
TELECOMMUNICATIONS
Select Income Statement Data
Revenue
Local services $ 199,729 $ 205,405 -3% $ 809,584 $ 829,685 -2%
Data and internet services (3) 111,378 98,127 14% 424,209 365,613 16%
Access services (2) (3) 107,147 118,123 -9% 427,959 431,339 -1%
Long distance services 36,493 40,406 -10% 153,272 169,496 -10%
Directory services 28,423 28,225 1% 114,138 113,092 1%
Other 21,226 27,077 -22% 96,205 107,816 -11%
Total revenue 504,396 517,363 -3% 2,025,367 2,017,041 0%
Expenses
Network access expense 49,836 40,224 24% 171,247 156,822 9%
Other operating expenses 177,284 185,154 -4% 722,803 742,620 -3%
Stock based compensation 2,380 1,994 19% 10,340 8,427 23%
Depreciation and amortization 117,923 124,705 -5% 476,487 520,204 -8%
Total expenses 347,423 352,077 -1% 1,380,877 1,428,073 -3%
Operating Income $ 156,973 $ 165,286 -5% $ 644,490 $ 588,968 9%
Other Financial and Operating Data
Access lines (4) 2,126,574 2,237,539 -5% 2,126,574 2,237,539 -5%
High-speed internet subscribers (4) 393,184 318,096 24% 393,184 318,096 24%
Switched access minutes of use (in millions) 2,434 2,705 -10% 10,227 11,225 -9%
Average monthly revenue per average access
line (4) $ 78.49 $ 76.61 2% $ 77.25 $ 73.40 5%
(1) See footnote (1) on the first page.
(2) For the quarter ended December 31, 2005, access services included
approximately $10.0 million of USF subsidy revenue received in that period
due to a late filing.
(3) See attached schedule for reconciliation of the revenue reclassification of
special access revenue from Access services to Data and internet services.
(4) Prior year data has been restated to conform to current period
presentation.
Citizens Communications Company
Condensed Consolidated Balance Sheet Data (1)
(Amounts in thousands)
December 31, 2006 December 31, 2005
--------------------- --------------------
ASSETS
------
Current assets:
Cash and cash equivalents $ 1,041,106 $ 263,749
Accounts receivable and other current assets 231,887 243,270
Assets of discontinued operations - 162,716
--------------------- --------------------
Total current assets 1,272,993 669,735
Property, plant and equipment, net 2,983,504 3,058,312
Other long-term assets 2,534,708 2,699,520
--------------------- --------------------
Total assets $ 6,791,205 $ 6,427,567
===================== ====================
LIABILITIES AND EQUITY
----------------------
Current liabilities:
Long-term debt due within one year $ 39,271 $ 227,693
Accounts payable and other current liabilities 386,372 367,800
Liabilities of discontinued operations - 46,266
--------------------- --------------------
Total current liabilities 425,643 641,759
Deferred income taxes and other liabilities 846,775 748,869
Long-term debt 4,460,755 3,995,130
Stockholders' equity 1,058,032 1,041,809
--------------------- --------------------
Total liabilities and equity $ 6,791,205 $ 6,427,567
===================== ====================
(1) See footnote (1) on the first page.
Citizens Communications Company
Condensed Consolidated Cash Flow Data (1)
(unaudited)
(Amounts in thousands)
For the year ended December 31,
---------------------------------------
2006 2005
----------------- ------------------
Cash flows provided by (used in) operating activities:
Net income $ 344,555 $ 202,375
Deduct: Gain on sale of discontinued operations (71,635) (1,167)
Income from discontinued operations (18,912) (13,266)
Adjustments to reconcile income to net cash provided
by operating activities:
Depreciation and amortization expense 476,487 520,204
Gain on expiration/settlement of customer advances (3,539) (681)
Loss on debt exchange 2,420 3,175
Stock based compensation 10,340 8,427
Other 89,467 100,101
----------------- ------------------
Net cash provided by continuing operating activities 829,183 819,168
Cash flows from investing activities:
Proceeds from sales of assets, net of selling expenses - 24,195
Proceeds from sale of discontinued operations 255,305 43,565
Securities sold - 1,112
Capital expenditures (268,806) (259,448)
Other assets (purchased) distributions received, net 67,050 (139)
----------------- ------------------
Net cash provided (used) by investing activities 53,549 (190,715)
Cash flows from financing activities:
Long-term debt borrowings 550,000 -
Debt issuance costs (6,948) -
Long-term debt payments (227,693) (6,299)
Issuance of common stock 27,200 47,550
Dividends paid (323,671) (338,364)
Shares repurchased (135,239) (250,000)
Other (264) (1,662)
----------------- ------------------
Net cash used by financing activities (116,615) (548,775)
Cash flows of discontinued operations:
Operating activities 17,833 27,500
Investing activities (6,593) (11,388)
Financing activities - (134)
----------------- ------------------
Net cash provided by
discontinued operations 11,240 15,978
Increase in cash and cash equivalents 777,357 95,656
Cash and cash equivalents at January 1, 263,749 168,093
----------------- ------------------
Cash and cash equivalents at December 31, $ 1,041,106 $ 263,749
================= ==================
Cash paid during the period for:
Interest $ 332,204 $ 318,638
Income taxes $ 5,365 $ 4,711
(1) See footnote (1) on the first page.
Schedule A
Reconciliation of Non-GAAP Financial Measures (1)
For the quarter ended December 31, For the year ended December 31,
---------------------------------------- --------------------------------------
(Amounts in thousands) 2006 2005 2006 2005
----------------- --------------------- ------------------- -----------------
Net Income to Free Cash Flow;
-----------------------------
Net Cash Provided by Operating Activities
-----------------------------------------
Net income $ 63,911 $ 76,781 $ 344,555 $ 202,375
Add back:
Depreciation and amortization 117,923 124,705 476,487 520,204
Income tax expense 23,576 10,215 136,479 75,270
Stock based compensation 2,380 1,994 10,340 8,427
Subtract:
Cash paid (refunded) for income taxes (2,965) 2,476 5,365 4,711
Investment and other income (loss), net 14,070 2,419 82,443 12,979
Capital expenditures 105,450 93,081 268,806 259,448
Gain (loss) on sale of discontinued
operations (444) - 71,635 1,167
----------------- --------------------- ------------------ ------------------
Free cash flow 91,679 115,719 539,612 527,971
Add back:
Deferred income taxes 28,138 45,535 132,031 100,636
Noncash (gains)/losses, net 2,057 9,690 (948) 20,282
Investment and other income (loss), net 14,070 2,419 21,015 12,979
Cash paid (refunded) for income taxes (2,965) 2,476 5,365 4,711
Capital expenditures 105,450 93,081 268,806 259,448
Subtract:
Changes in current assets and liabilities (42,912) 20,820 (10,121) 23,162
Income tax expense 23,576 10,215 136,479 75,270
Stock based compensation 2,380 1,994 10,340 8,427
----------------- --------------------- ------------------ ------------------
Net cash provided by operating activities $ 255,385 $ 235,891 $ 829,183 $ 819,168
================= ===================== ================== ==================
(1) See footnote (1) on the first page.
Schedule B
Reconciliation of Non-GAAP Financial Measures (1)
For the quarter ended December 31, For the year ended December 31,
------------------------------------- ---------------------------------------
(Amounts in thousands) 2006 2005 2006 2005
----------------- ------------------ ------------------ -------------------
Operating Cash Flow and
-----------------------
Operating Cash Flow Margin
--------------------------
Operating Income $ 156,973 $ 165,286 $ 644,490 $ 588,968
Add back:
Depreciation and amortization 117,923 124,705 476,487 520,204
----------------- ------------------ ------------------ -------------------
Operating cash flow $ 274,896 $ 289,991 $ 1,120,977 $ 1,109,172
================= ================== ================== ===================
Revenue(2) $ 504,396 $ 517,363 $ 2,025,367 $ 2,017,041
================= ================== ================== ===================
Operating income margin
(Operating income divided by revenue) 31.1% 31.9% 31.8% 29.2%
================= ================== ================== ===================
Operating cash flow margin
(Operating cash flow divided by revenue) 54.5% 56.1% 55.3% 55.0%
================= ================== ================== ===================
(1) See footnote (1) on the first page.
(2) For the quarter ended December 31, 2005, revenue included
approximately $10.0 million of USF subsidy revenue received in that
period due to a late filing.
Schedule C
Revenue Reclassification
During the fourth quarter of 2006, the Company changed its classification of
certain revenues. Previously, non-switched or special access revenue (which is
primarily comprised of DS-1s and DS-3s), was classified in Access Revenues. The
Company has determined that this revenue is more appropriately classified in
Data and Internet Services. Giving effect to this change, Access Revenues is now
comprised of switched access and subsidies. Prior year data has been
reclassified and is presented below for comparative purposes.
For the quarter ended
------------------------------------------------------------------------------------
2006 March 31, June 30, September 30, December 31, Total Year
---- -------------- --------------- ------------------ --------------- --------------
Access Services:
As previously reported $ 160,968 $ 153,581 $ 154,838
Reclassification of special access
to data and internet services (49,731) (48,971) (49,873)
-------------- --------------- ------------------
As currently reported $ 111,237 $ 104,610 $ 104,965 $ 107,147 $ 427,959
============== =============== ================== =============== ==============
Data and Internet Services:
As previously reported $ 50,358 $ 54,488 $ 59,410
Reclassification of special access
from access services 49,731 48,971 49,873
-------------- --------------- ------------------
As currently reported $ 100,089 $ 103,459 $ 109,283 $ 111,378 $ 424,209
============== =============== ================== =============== ==============
2005
----
Access Services:
As previously reported $ 156,824 $ 151,654 $ 145,417 $ 168,031 $ 621,926
Reclassification of special access
to data and internet services (45,948) (47,612) (47,119) (49,908) (190,587)
-------------- --------------- ------------------ --------------- --------------
As currently reported $ 110,876 $ 104,042 $ 98,298 $ 118,123 $ 431,339
============== =============== ================== =============== ==============
Data and Internet Services:
As previously reported $ 38,609 $ 42,392 $ 45,806 $ 48,219 $ 175,026
Reclassification of special access
from access services 45,948 47,612 47,119 49,908 190,587
-------------- --------------- ------------------ --------------- --------------
As currently reported $ 84,557 $ 90,004 $ 92,925 $ 98,127 $ 365,613
============== =============== ================== =============== ==============
Schedule D
Citizens Communications Company
Operating Metrics
In the fourth quarter of 2006 the Company revised its reporting of certain
operating metrics to be consistent with those used by management to run the
business. Prior year data being reported is consistent with that used by
management internally on a daily basis and is presented below for comparative
purposes.
2004 2005
------------ ----------------------------------------------------------
December 31, March 31, June 30, September 30, December 31,
------------ ----------- ------------ -------------- -------------
Access Lines
- ------------
Previously disclosed 2,320,772 2,298,510 2,275,465 2,245,088 2,218,570
Revised 2,336,423 2,316,535 2,295,267 2,265,247 2,237,539
------------ ----------- ------------ -------------- -------------
Change 15,651 18,025 19,802 20,159 18,969
============ =========== ============ ============== =============
High Speed Internet Customers
- -----------------------------
Previously disclosed 212,277 242,768 267,270 290,228 311,416
Revised 220,313 250,477 274,333 297,751 318,096
------------ ----------- ------------ -------------- -------------
Change 8,036 7,709 7,063 7,523 6,680
============ =========== ============ ============== =============
2006
---------------------------------------------------------
March 31, June 30, September 30, December 31,
----------- ------------ -------------- --------------
Access Lines
- ------------
Previsouly disclosed 2,192,265 2,162,712 2,132,868
Revised 2,213,731 2,188,901 2,158,001 2,126,574
----------- ------------ -------------- =============
Change 21,466 26,189 25,133
=========== ============ ==============
High Speed Internet Customers
- -----------------------------
Previously disclosed 330,832 350,411 362,698
Revised 341,452 358,851 373,489 393,184
----------- ------------ -------------- =============
Change 10,620 8,440 10,791
=========== ============ ==============