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 2007 First-Quarter Results
Stamford, Conn., May 2, 2007 -- Citizens Communications (NYSE:CZN) today
reported first quarter 2007 revenues of $556.1 million, operating income of
$193.3 million, and net income of $67.7 million.
First quarter 2007 revenue was $556.1 million, as compared to $506.9 million in
the first quarter of 2006. First quarter 2007 results include revenues of $20.7
million related to the operations of Commonwealth Telephone Enterprises, since
the date of acquisition on March 8, 2007. Revenues, excluding the acquired
property, were up 5.6 percent as compared to the same period last year due to
higher access, data and internet services, partially offset by declines in local
services. Access revenues were significantly higher in the first quarter of 2007
as compared to 2006 due to the settlement of a switched access dispute with a
favorable impact of $38.7 million offset by declines in other access service
revenues (which include subsidy payments we receive from federal and state
agencies). The Company experienced 13.8 percent growth in data and internet
services revenue in the first quarter of 2007, compared to the first quarter of
2006.
First quarter 2007 other operating expenses were $186.5 million, as compared to
$184.6 million in the first quarter of 2006. Excluding the expense increase due
to the acquisition, the company's other operating expenses for the first quarter
of 2007 decreased by approximately $8.2 million or 4.4 percent, as compared to
the first quarter of 2006 primarily driven by reductions in employees and
improved expense control in benefit costs.
Depreciation and amortization expense for the first quarter of 2007 was $122.2
million, as compared to $122.0 million in the first quarter of 2006.
Depreciation and amortization expense for the first quarter of 2007, excluding
the impact of the acquisition, decreased $6.7 million or 5.5 percent as compared
to the first quarter of 2006. The decrease is primarily due to a declining net
asset base.
The Company added approximately 70,800 high-speed internet customers during the
quarter reflecting 20,300 from the base Citizens property and 50,500 from the
acquired Commonwealth property, and had more than 464,000 high-speed data
subscribers at March 31, 2007.
-MORE-
Operating income for the first quarter of 2007 was $193.3 million and operating
income margin was 34.8 percent, compared to $157.3 million and 31.0 percent in
the first quarter of 2006. Capital expenditures were $45.1 million for the first
quarter of 2007, including $4.3 million related to the acquired property.
Free cash flow for the first quarter was $187.6 million. The company's dividend
represents a payout of 46 percent of free cash flow for the first quarter.
During the first quarter, the Company repurchased 823,000 shares of its common
stock for $12.0 million.
"We are off to a good start with strong first quarter results. Product revenue
growth coupled with disciplined expense control generated a 56.7% operating cash
flow margin and our focus on the customer drove penetration levels for all
voice, data and video product bundles," said Maggie Wilderotter, Chairman and
CEO of Citizens. "We are very excited about completing the Commonwealth
acquisition and full integration of these Pennsylvania properties is now
underway."
Outlook
- -------
As a result of the favorable settlement dispute and the successful closing of
the merger transaction with Commonwealth Telephone Enterprises on March 8, 2007,
the Company is revising its 2007 guidance. We now expect to spend between $315
million and $325 million in capital expenditures in 2007. Free cash flow for
2007 is now estimated to be between $500 million and $520 million.
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
successfully integrate Commonwealth's operations and to realize the synergies
from the acquisition; 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
March 31,
--------------------------- %
(Amounts in thousands, except per share amounts) 2007 2006 Change
---------------------------------------
Income Statement Data
Revenue $556,147 $506,861 10%
Network access expenses 50,793 40,218 26%
Other operating expenses 186,464 184,624 1%
Stock based compensation 3,407 2,677 27%
Depreciation and amortization 122,181 122,004 0%
Operating income 193,302 157,338 23%
Investment and other income (loss), net 10,017 (1,351) NM
Interest expense 93,964 85,393 10%
Income tax expense 41,688 26,607 57%
Income from discontinued operations, net of tax - 6,496 NM
Net income attributable to common shareholders 67,667 50,483 34%
Weighted average shares outstanding 326,542 327,132 0%
Basic net income per share attributable to common shareholders (2) $ 0.21 $ 0.15 40%
Other Financial Data
Capital expenditures $ 45,111 $ 43,765 3%
Free cash flow (3) 187,555 163,296 15%
Dividends paid 85,462 82,633 3%
Dividend payout ratio (4) 46% 51% -10%
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises (CTE) for
approximately $1.1 billion, and have included the historical results of CTE
from the date of acquisition.
(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.
(4) Represents dividends paid divided by free cash flow.
Citizens Communications Company
Financial and Operating Data (1)
(unaudited)
For the quarter ended
March 31,
------------------------------- %
(Amounts in thousands, except operating data) 2007 2006 Change
-------------------------------------------
TELECOMMUNICATIONS
Select Income Statement Data
Revenue
Local services $ 206,043 $ 203,566 1%
Data and internet services 116,425 100,089 16%
Access services 139,024 111,237 25%
Long distance services 40,428 39,158 3%
Directory services 28,670 28,797 0%
Other 25,557 24,014 6%
------------- --------------
Total revenue 556,147 506,861 10%
------------- --------------
Expenses
Network access expenses 50,793 40,218 26%
Other operating expenses 186,464 184,624 1%
Stock based compensation 3,407 2,677 27%
Depreciation and amortization 122,181 122,004 0%
------------- --------------
Total expenses 362,845 349,523 4%
------------- --------------
Operating Income $ 193,302 $ 157,338 23%
============= ==============
Other Financial and Operating Data
Access lines 2,538,471 2,213,731 15%
High-speed internet subscribers 464,055 341,452 36%
Wireline bundle subscribers 579,506 462,661 25%
Switched access minutes of use (in millions) 2,438 2,654 -8%
Average monthly revenue per average access line (2) $ 84.38 $ 75.90 11%
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises (CTE) for
approximately $1.1 billion, and have included the historical results of CTE
from the date of acquisition.
(2) For the quarter ended March 31, 2007, the calculation excludes CTE data and
includes the $38.7 million favorable impact from the settlement of a
switched access dispute. The amount is $78.29 without the $38.7 million
favorable impact from the settlement.
Citizens Communications Company
Condensed Consolidated Balance Sheet Data (1)
(Amounts in thousands)
(Unaudited)
March 31, 2007 December 31, 2006
-------------------- -------------------
ASSETS
------
Current assets:
Cash and cash equivalents $ 1,037,729 $ 1,041,106
Accounts receivable and other current assets 279,496 231,887
-------------------- -------------------
Total current assets 1,317,225 1,272,993
Property, plant and equipment, net 3,329,687 2,983,504
Other long-term assets 3,582,405 2,534,708
-------------------- -------------------
Total assets $ 8,229,317 $ 6,791,205
==================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Long-term debt due within one year $ 569,848 $ 39,271
Accounts payable and other current liabilities 423,656 386,372
-------------------- -------------------
Total current liabilities 993,504 425,643
Deferred income taxes and other liabilities 1,164,223 846,775
Long-term debt 4,755,148 4,460,755
Shareholders' equity 1,316,442 1,058,032
-------------------- -------------------
Total liabilities and shareholders' equity $ 8,229,317 $ 6,791,205
==================== ===================
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises (CTE) for
approximately $1.1 billion, and have included the historical results of CTE
from the date of acquisition.
Citizens Communications Company
Condensed Consolidated Cash Flow Data (1)
(unaudited)
(Amounts in thousands)
For the three months ended March 31,
----------------------------------------
2007 2006
----------------- ------------------
Cash flows provided by (used in) operating activities:
Net income $ 67,667 $ 50,483
Deduct: Income from discontinued operations - (6,496)
Adjustments to reconcile income to net cash provided
by operating activities:
Depreciation and amortization expense 122,181 122,004
Stock based compensation 3,407 2,677
Other (21,994) (4,055)
----------------- ------------------
Net cash provided by continuing operating activities 171,261 164,613
Cash flows from investing activities:
Capital expenditures (45,111) (43,765)
Cash paid for Commonwealth acquisition, net (649,507) -
Other assets (purchased) distributions received, net 571 324
----------------- ------------------
Net cash used by investing activities (694,047) (43,441)
Cash flows from financing activities:
Long-term debt borrowings 950,000 -
Financing costs paid (9,815) -
Long-term debt payments (327,815) (240)
Issuance of common stock 5,119 9,452
Dividends paid (85,462) (82,633)
Common stock repurchased (12,016) (37,916)
Other (602) (473)
----------------- ------------------
Net cash used by financing activities 519,409 (111,810)
Cash flows of discontinued operations:
Operating activities - 8,580
Investing activities - (2,422)
Financing activities - -
----------------- ------------------
Net cash provided by discontinued operations - 6,158
(Decrease) Increase in cash and cash equivalents (3,377) 15,520
Cash and cash equivalents at January 1, 1,041,106 268,917
----------------- ------------------
Cash and cash equivalents at March 31, $ 1,037,729 $ 284,437
================= ==================
Cash paid during the period for:
Interest $ 97,416 $ 95,079
Income taxes (refunds) $ 6,786 $ (133)
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises (CTE) for
approximately $1.1 billion, and have included the historical results of CTE
from the date of acquisition.
Schedule A
Reconciliation of Non-GAAP Financial Measures (1)
For the quarter ended March 31,
-----------------------------------------
(Amounts in thousands) 2007 2006
-------------------- -------------------
Net Income to Free Cash Flow;
-----------------------------
Net Cash Provided by Operating Activities
-----------------------------------------
Net income $ 67,667 $ 50,483
Add back:
Depreciation and amortization 122,181 122,004
Income tax expense 41,688 26,607
Stock based compensation 3,407 2,677
Subtract:
Cash paid (refunded) for income taxes 6,786 (133)
Investment and other income (loss), net
of interest income (4,509) (5,157)
Capital expenditures 45,111 43,765
-------------------- -------------------
Free cash flow 187,555 163,296
Add back:
Deferred income taxes 23,614 24,163
Non-cash (gains)/losses, net 6,389 7,039
Investment and other income (loss), net
of interest income (4,509) (5,157)
Cash paid (refunded) for income taxes 6,786 (133)
Capital expenditures 45,111 43,765
Subtract:
Changes in current assets and liabilities 48,590 32,580
Income tax expense 41,688 26,607
Stock based compensation 3,407 2,677
Income from discontinued operations - 6,496
-------------------- -------------------
Net cash provided by operating activities $ 171,261 $ 164,613
==================== ===================
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises (CTE) for
approximately $1.1 billion, and have included the historical results of CTE
from the date of acquisition.
Schedule B
Reconciliation of Non-GAAP Financial Measures (1)
For the quarter ended March 31,
------------------------------------------
(Amounts in thousands) 2007 2006
-------------------- --------------------
Operating Cash Flow and
-----------------------
Operating Cash Flow Margin
--------------------------
Operating Income $ 193,302 $ 157,338
Add back:
Depreciation and amortization 122,181 122,004
-------------------- --------------------
Operating cash flow $ 315,483 $ 279,342
==================== ====================
Revenue $ 556,147 $ 506,861
==================== ====================
Operating income margin
(Operating income divided by revenue) 34.8% 31.0%
==================== ====================
Operating cash flow margin
(Operating cash flow divided by revenue) 56.7% 55.1%
==================== ====================
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises (CTE) for
approximately $1.1 billion, and have included the historical results of CTE
from the date of acquisition.
Schedule C
Citizens Communications Company
Consolidating Financial and Operating Data Support (1)
(unaudited)
For the quarter ended
March 31, 2007
------------------------------------------------
Citizens For the
CTE (1) (excluding Quarter Ended %
(Amounts in thousands, except operating data) As Reported (for 23 days) CTE) (1) March 31, (2006) Change
------------------------------------------------ ----------------- ------
TELECOMMUNICATIONS
Select Income Statement Data
Revenue
Local services $ 206,043 $ 8,674 $ 197,369 $ 203,566 -3%
Data and internet services 116,425 2,556 113,869 100,089 14%
Access services 139,024 5,695 133,329 111,237 20%
Long distance services 40,428 2,047 38,381 39,158 -2%
Directory services 28,670 68 28,602 28,797 -1%
Other 25,557 1,626 23,931 24,014 0%
--------------- --------------- --------------- ----------------
Total revenue 556,147 20,666 535,481 506,861 6%
--------------- --------------- --------------- ----------------
Expenses
Network access expenses 50,793 3,849 46,944 40,218 17%
Other operating expenses 186,464 10,004 176,460 184,624 -4%
Stock based compensation 3,407 - 3,407 2,677 27%
Depreciation and amortization 122,181 6,899 (2) 115,282 122,004 -6%
--------------- --------------- --------------- ----------------
Total expenses 362,845 20,752 342,093 349,523 -2%
--------------- --------------- --------------- ----------------
Operating Income $ 193,302 $ (86) $ 193,388 $ 157,338 23%
=============== =============== =============== ================
Other Financial and Operating Data
Capital expenditures $ 45,111 $ 4,285 $ 40,826 $ 43,765 -7%
Access lines 2,538,471 434,577 2,103,894 2,213,731 -5%
High-speed internet subscribers 464,055 50,537 413,518 341,452 21%
Wireline bundle subscribers 579,506 37,620 541,886 462,661 17%
Switched access minutes of use (in millions) N/A N/A 2,438 2,654 -8%
Average monthly revenue per average access line (3) N/A N/A $ 84.38 $ 75.90 11%
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises (CTE) for
approximately $1.1 billion, and have included the historical results of CTE
from the date of acquisition.
(2) Includes amortization expense of $3,939 for the 23 days of March regarding
the customer base acquired in the Commonwealth acquisition.
(3) For the quarter ended March 31, 2007, the calculation includes the $38.7
million favorable impact from the settlement of a switched access dispute.
The amount is $78.29 without the $38.7 million favorable impact from the
settlement.