Exhibit 99.1
Citizens Communications
3 High Ridge Park
Stamford, CT 06905
203.614.5600
Web site: www.czn.net
Contact:
David Whitehouse
Senior Vice President & Treasurer
203.614.5708
david.whitehouse@czn.com
- ------------------------
Citizens Communications Reports 2007 Fourth-Quarter Results;
Announces New Stock Repurchase Program
* Revenue up 14% year over year
* Continued strong operating income and cash flow margins
* 2007 free cash flow of $528 million
* Year-to-date dividend payout ratio of 64%
* 22,400 high speed internet additions
* Global Valley acquisition completed (15,300 access lines)
* $200 million stock repurchase program announced
Stamford, Conn., February 26, 2008 -- Citizens Communications (NYSE:CZN) today
reported fourth quarter 2007 revenue of $577.2 million, operating income of
$174.9 million, and net income of $59.0 million.
"We delivered another quarter of strong financial and operating results," said
Maggie Wilderotter, Chairman and CEO of Citizens. "Continued customer product
revenue growth along with disciplined expense control, realized synergies on our
Commonwealth acquisition and other expense reduction initiatives generated a
55.4 percent operating cash flow margin. Our penetration levels increased on all
bundled products as our fourth quarter promotions drove residential high speed
penetration to 32 percent and high speed revenues continue to be over $40.00 per
customer per month. Our wireless data roll-out is now up and running in 13
municipalities, four colleges and universities and over 50 hot spots in our
territory. Finally, our integration of Global Valley Networks is well underway."
Revenue for the fourth quarter of 2007 was $577.2 million, as compared to $504.4
million in the fourth quarter of 2006, a 14 percent increase. The fourth quarter
2007 increase of $72.8 million is primarily the result of $82.4 million of
revenues contributed by the operations of Commonwealth Telephone Enterprises,
which was acquired on March 8, 2007, and Global Valley, which was acquired on
October 31, 2007, and a $15.8 million increase in data and internet services
revenue, offset by declines in Federal and state subsidies and a decline in
basic access lines.
Other operating expenses and network access expenses for the fourth quarter of
2007 were $257.2 million, as compared to $229.5 million in the fourth quarter of
2006, a 12 percent increase. The fourth quarter 2007 increase of $27.7 million
is primarily the result of $20.7 million in expenses attributable to the
acquired operations of Commonwealth Telephone Enterprises and Global Valley
($35.1 million excluding the impact of a pension curtailment gain of $14.4
million, resulting from the freeze placed on certain pension benefits of the
former Commonwealth employees). The purchases of Commonwealth Telephone
Enterprises and Global Valley have enabled the Company to leverage its
centralized back office, customer service and administrative support functions
over a larger customer base.
Operating income for the fourth quarter of 2007 was $174.9 million and operating
income margin was 30.3 percent, as compared to operating income of $157.0
million and operating income margin of 31.1 percent in the fourth quarter of
2006. The fourth quarter 2007 increase of $17.9 million is primarily the result
of $32.2 million contributed by the acquired operations of Commonwealth
Telephone Enterprises and Global Valley, partially offset by increases in
network access expenses and a reduction in revenue.
The Company added approximately 22,400 high-speed internet customers during the
fourth quarter of 2007 and had more than 523,800 high-speed internet customers
at December 31, 2007. The Company added approximately 9,400 video customers
during the fourth quarter of 2007 and had more than 93,500 video customers at
December 31, 2007. These fourth quarter net additions to high-speed internet and
video customers exclude the impact of the Global Valley acquisition.
The Global Valley acquisition was completed on October 31, 2007. Global Valley
represents $2.3 million of revenue for the two months in the quarter, 15,300
access lines and 4,200 high-speed internet customers.
Capital expenditures were $113.2 million for the fourth quarter of 2007 and
$315.8 million for the year, including $34.3 million related to the acquired
properties since the date of their respective acquisitions.
Free cash flow was $105.3 million for the fourth quarter of 2007 and $528.0
million for the year. The Company's $1 per common share annual dividend
represents a payout of 64 percent of free cash flow for the year.
During the fourth quarter, the Company repurchased 2,175,000 shares of its
common stock for $30.9 million and completed its $250.0 million authorized stock
repurchase program.
The Company's Board of Directors has authorized a new common stock share
repurchase program. Under the new program, up to $200 million of common stock
may be repurchased over the next 12 months.
The Company expects that its capital expenditures and free cash flow for the
full year 2008 will be approximately $300 million to $310 million and
approximately $450 million to $475 million, respectively. The Company's 2008
free cash flow expectations take into consideration an estimate of cash taxes in
the range of $130 million to $140 million. The Company's 2008 cash tax estimate
does not reflect the impact of the "Economic Stimulus Act of 2008," which the
Company is currently evaluating.
-MORE-
The Company's next regular quarterly cash dividend of $0.25 per share will be
paid on March 31, 2008 to shareholders of record on March 10, 2008. The Company
expects that dividends paid to stockholders in 2008 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 measures 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. The Company has shown adjustments to its financial presentations to
exclude $14.4 million in pension curtailment gain in the fourth quarter and full
year of 2007, and $3.2 million of severance and early retirement costs in the
fourth quarter of 2006, and severance and early retirement costs of $13.9
million for the full year of 2007 and $7.2 million for the full year 2006,
because the Company believes that the magnitude of such gains and costs in the
third and fourth quarters of 2007 materially exceeds that which has been
incurred by the Company in any other quarter during 2006 and 2007.
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 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
Citizens Communications Company (NYSE:CZN) operates under the brand name of
Frontier and offers telephone, television and internet services in 24 states
with approximately 5,900 employees. More information is available at
www.czn.com, www.frontieronline.com and www.frontier.myway.com.
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: reductions in the number
of our access lines and high-speed internet subscribers; the effects of
competition from cable, wireless and other wireline carriers (through voice over
internet protocol (VOIP) or otherwise); the effects of greater than anticipated
competition requiring new pricing, marketing strategies or new product offerings
and the risk that we will not respond on a timely or profitable basis; the
effects of general and local economic, business, industry and employment
conditions on our revenues; our ability to effectively manage service quality;
our ability to successfully introduce new product offerings, including our
ability to offer bundled service packages on terms that are both profitable to
us and attractive to our customers; our ability to sell enhanced and data
services in order to offset ongoing declines in revenue from local services,
switched access services and subsidies; changes in accounting policies or
practices adopted voluntarily or as required by generally accepted accounting
principles or regulators; the effects of ongoing changes in the regulation of
the communications industry as a result of federal and state legislation and
regulation, including potential changes in state rate of return limitations on
our earnings, access charges and subsidy payments, and regulatory network
upgrade and reliability requirements; our ability to effectively manage our
operations, operating expenses and capital expenditures, to pay dividends and to
reduce or refinance our debt; adverse changes in the ratings given to our debt
securities by nationally accredited ratings organizations, which could limit or
restrict the availability and/or increase the cost of financing; the effects of
bankruptcies in the telecommunications industry, which could result in potential
bad debts; the effects of technological changes and competition on our capital
expenditures and product and service offerings, including the lack of assurance
that our ongoing network improvements will be sufficient to meet or exceed the
capabilities and quality of competing networks; the effects of increased
medical, retiree and pension expenses and related funding requirements; changes
in income tax rates, tax laws, regulations or rulings, and/or federal or state
tax assessments; the effects of state regulatory cash management policies on our
ability to transfer cash among our subsidiaries and to the parent company; our
ability to successfully renegotiate union contracts expiring in 2008 and
thereafter; our ability to pay a $1.00 per common share dividend annually, which
may be affected by our cash flow from operations, amount of capital
expenditures, debt service requirements, cash paid for income taxes (which will
increase in the future) and our liquidity; the effects of fully utilizing our
federal net operating loss carryforwards and AMT tax credit carryforwards that
were generated in prior years, which have significantly increased our cash taxes
in 2007 and will continue to do so in 2008 and 2009; the effects of any future
liabilities or compliance costs in connection with worker health and safety
matters; and the effects of any unfavorable outcome with respect to any of our
current or future legal, governmental or regulatory proceedings, audits or
disputes. 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)
For the quarter ended For the year ended
December 31, December 31,
------------------------- % ----------------------------- %
(Amounts in thousands, except per share amounts) 2007 2006 Change 2007 2006 Change
--------------------------------- --------------------------------------
Income Statement Data
Revenue $577,228 $504,396 14% $2,288,015 $2,025,367 13%
------------ ----------- -------------- -------------
Network access expenses 66,601 49,836 34% 228,242 171,247 33%
Other operating expenses 190,580 179,664 6% 808,501 733,143 10%
Depreciation and amortization 145,156 117,923 23% 545,856 476,487 15%
------------ ----------- -------------- -------------
Total operating expenses 402,337 347,423 16% 1,582,599 1,380,877 15%
------------ ----------- -------------- -------------
Operating income 174,891 156,973 11% 705,416 644,490 9%
Investment and other income (loss), net (2) 7,276 14,070 -48% 17,948 82,443 -78%
Interest expense 92,925 83,526 11% 380,696 336,446 13%
------------ ----------- -------------- -------------
Income from continuing operations before
income taxes 89,242 87,517 2% 342,668 390,487 -12%
Income tax expense 30,229 23,576 28% 128,014 136,479 -6%
------------ ----------- -------------- -------------
Income from continuing operations 59,013 63,941 -8% 214,654 254,008 -15%
Income (loss) from discontinued operations, net of tax (3) - (30) 100% - 90,547 -100%
------------ ----------- -------------- -------------
Net income attributable to common shareholders $ 59,013 $ 63,911 -8% $ 214,654 $ 344,555 -38%
============ =========== ============== =============
Weighted average shares outstanding 327,028 320,774 2% 331,037 322,641 3%
Basic net income per share attributable to
common shareholders (4)
Income from continuing operations $ 0.18 $ 0.20 -10% $ 0.65 $ 0.79 -18%
Income from discontinued operations - - 0% - 0.28 -100%
------------ ----------- -------------- -------------
Net income per common share $ 0.18 $ 0.20 -10% $ 0.65 $ 1.07 -39%
============ =========== ============== =============
Other Financial Data
Capital expenditures $113,152 $105,450 7% $ 315,793 $ 268,806 17%
Operating cash flow (5) 320,047 274,896 16% 1,251,272 1,120,977 12%
Free cash flow (5) 105,293 101,348 4% 528,005 561,784 -6%
Dividends paid 81,941 80,556 2% 336,025 323,671 4%
Dividend payout ratio (6) 78% 79% -1% 64% 58% 10%
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises, Inc.
(CTE) for approximately $1.1 billion, and on October 31, 2007, we acquired
Global Valley Networks Inc. and GVN Services (together GVN) for $62.0
million, and have included the historical results of CTE and GVN from the
dates of acquisition.
(2) In April 2007, we redeemed $495.2 million principal amount of our 7.625%
Senior Notes due 2008. The debt retirement generated a pre-tax loss on the
early extinguishment of approximately $16.3 million. In April 2006, we
received $64.6 million upon the liquidation of the Rural Telephone Bank.
(3) On July 31, 2006, we sold our CLEC business, Electric Lightwave, LLC (ELI),
for $247.0 million in cash plus the assumption of approximately $4.0
million in capital lease obligations. We recognized an after-tax gain on
the disposal of ELI of $71.6 million.
(4) Calculated based on weighted average shares outstanding.
(5) A reconciliation to the most comparable GAAP measure is presented at the
end of these tables.
(6) Represents dividends paid divided by free cash flow.
1
Citizens Communications Company
Consolidated Financial and Operating Data (1)
For the quarter ended For the year ended
December 31, December 31,
----------------------------- % ------------------------------- %
(Amounts in thousands, except operating data) 2007 2006 Change 2007 2006 Change
--------------------------------------- --------------------------------------
Select Income Statement Data
Revenue
Local services $ 219,977 $ 199,729 10% $ 875,762 (2) $ 809,584 8%
Data and internet services 147,292 111,378 32% 543,764 (2) 424,209 28%
Access services 113,881 107,147 6% 479,462 427,959 12%
Long distance services 45,313 36,493 24% 180,525 153,272 18%
Directory services 28,910 28,423 2% 114,586 114,138 0%
Other 21,855 21,226 3% 93,916 96,205 -2%
------------- -------------- ------------ ---------------
Total revenue 577,228 504,396 14% 2,288,015 2,025,367 13%
------------- -------------- ------------ ---------------
Expenses
Network access expenses 66,601 49,836 34% 228,242 (2) 171,247 33%
Other operating expenses (3) 190,580 179,664 6% 808,501 (2) 733,143 10%
Depreciation and amortization 145,156 117,923 23% 545,856 476,487 15%
------------- -------------- ------------ ---------------
Total operating expenses 402,337 347,423 16% 1,582,599 1,380,877 15%
------------- -------------- ------------ ---------------
Operating Income $ 174,891 $ 156,973 11% $ 705,416 $ 644,490 9%
============= ============== ============ ===============
Other Financial and Operating Data
Employees 5,939 5,446 9% 5,939 5,446 9%
Access lines 2,431,676 2,126,574 14% 2,431,676 2,126,574 14%
High-speed internet (HSI) subscribers 523,845 393,184 33% 523,845 393,184 33%
Video subscribers 93,596 62,851 49% 93,596 62,851 49%
Long distance subscribers 1,569,620 1,382,411 14% 1,569,620 1,382,411 14%
Switched access minutes of use (in millions) 2,605 2,434 7% 10,592 10,227 4%
Average monthly revenue per average
access line (4) $ 78.64 $ 78.48 0% $ 81.50 $ 77.25 6%
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises, Inc.
(CTE) for approximately $1.1 billion, and on October 31, 2007, we acquired
Global Valley Networks Inc. and GVN Services (together GVN) for $62.0
million, and have included the historical results of CTE and GVN from the
dates of acquisition.
(2) Reflects a reclassification of $14.1 million of revenue of our CTE
acquisition from local services to data and internet services. Also,
expenses reflect a reclassification of $2.4 million of expenses of our CTE
acquisition from other operating expenses to network access expenses.
(3) For the year ended December 31, 2007, includes severance and early
retirement costs of $13.9 million. For the quarter and year ended December
31, 2006, includes severance and early retirement costs of $3.2 million and
$7.2 million, respectively.
(4) For the year ended December 31, 2007, the calculation excludes CTE and GVN
data and includes the $38.7 million favorable impact from the first quarter
2007 settlement of a switched access dispute. The amount is $79.94 without
the $38.7 million favorable impact from the settlement.
2
Citizens Communications Company
Condensed Consolidated Balance Sheet Data (1)
(Amounts in thousands)
December 31, 2007 December 31, 2006
-------------------- -------------------
ASSETS
------
Current assets:
Cash and cash equivalents $ 226,466 $ 1,041,106
Accounts receivable and other current assets 297,688 231,887
-------------------- -------------------
Total current assets 524,154 1,272,993
Property, plant and equipment, net 3,335,244 2,983,504
Other long-term assets 3,396,671 2,541,039
-------------------- -------------------
Total assets $ 7,256,069 $ 6,797,536
==================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Long-term debt due within one year $ 2,448 $ 39,271
Accounts payable and other current liabilities 443,443 386,372
-------------------- -------------------
Total current liabilities 445,891 425,643
Deferred income taxes and other liabilities 1,075,382 846,775
Long-term debt 4,736,897 4,467,086
Shareholders' equity 997,899 1,058,032
-------------------- -------------------
Total liabilities and shareholders' equity $ 7,256,069 $ 6,797,536
==================== ===================
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises, Inc.
(CTE) for approximately $1.1 billion, and on October 31, 2007, we acquired
Global Valley Networks Inc. and GVN Services (together GVN) for $62.0
million, and have included the historical results of CTE and GVN from the
dates of acquisition.
3
Citizens Communications Company
Consolidated Cash Flow Data (1)
(Amounts in thousands)
For the year ended December 31,
-----------------------------------------
2007 2006
----------------- -------------------
Cash flows provided by (used in) operating activities:
Net income $ 214,654 $ 344,555
Deduct: Income from discontinued operations - (18,912)
Gain on sale of discontinued operations - (71,635)
Adjustments to reconcile income to net cash provided
by operating activities:
Depreciation and amortization expense 545,856 476,487
Stock based compensation expense 9,022 10,340
Loss on debt exchange - 2,420
Losses on extinguishment of debt 20,186 -
Investment gain - (61,428)
Other non-cash adjustments (7,598) 5,204
Deferred income taxes 81,011 132,031
Legal settlement (7,905) -
Change in accounts receivable (4,714) 15,333
Change in accounts payable and other liabilities (36,257) (3,064)
Change in other current assets 7,428 (2,148)
----------------- -------------------
Net cash provided by continuing operating activities 821,683 829,183
Cash flows provided from (used by) investing activities:
Capital expenditures (315,793) (268,806)
Cash paid for acquisitions, net (725,548) -
Proceeds from sale of discontinued operations - 255,305
Other assets (purchased) distributions received, net 6,629 67,050
----------------- -------------------
Net cash (used by) provided from investing activities (1,034,712) 53,549
Cash flows provided from (used by) financing activities:
Long-term debt borrowings 950,000 550,000
Debt issuance costs (12,196) (6,948)
Premium paid to retire debt (20,186) -
Long-term debt payments (946,070) (227,693)
Issuance of common stock 13,808 27,200
Dividends paid (336,025) (323,671)
Common stock repurchased (250,000) (135,239)
Other (942) (264)
----------------- -------------------
Net cash used by financing activities (601,611) (116,615)
Cash flows of discontinued operations:
Operating activities - 17,833
Investing activities - (6,593)
Financing activities - -
----------------- -------------------
Net cash provided by discontinued operations - 11,240
(Decrease) increase in cash and cash equivalents (814,640) 777,357
Cash and cash equivalents at January 1, 1,041,106 263,749
----------------- -------------------
Cash and cash equivalents at December 31, $ 226,466 $ 1,041,106
================= ===================
Cash paid during the period for:
Interest $ 364,381 $ 332,204
Income taxes $ 54,407 $ 5,365
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises, Inc.
(CTE) for approximately $1.1 billion, and on October 31, 2007, we acquired
Global Valley Networks Inc. and GVN Services (together GVN) for $62.0
million, and have included the historical results of CTE and GVN from the
dates of acquisition.
4
Schedule A
Reconciliation of Non-GAAP Financial Measures (1)
For the quarter For the year
ended December 31, ended December 31,
----------------------------- -------------------------------
(Amounts in thousands) 2007 2006 2007 2006
------------- -------------- --------------- ---------------
Net Income to Free Cash Flow;
-----------------------------
Net Cash Provided by Operating Activities
-----------------------------------------
Net income $ 59,013 $ 63,911 $ 214,654 $ 344,555
Add back:
Depreciation and amortization 145,156 117,923 545,856 476,487
Income tax expense 30,229 23,576 128,014 136,479
Stock based compensation 1,213 2,380 9,022 10,340
Subtract:
Cash paid (refunded) for income taxes 737 (2,965) 54,407 5,365
Pension curtailment gain (non-cash) 14,379 - 14,379 -
Investment and other income (loss), net
of interest income 2,050 4,401 (15,038) 60,271
Capital expenditures 113,152 105,450 315,793 268,806
Gain (loss) on sale of discontinued operations - (444) - 71,635
------------- ------------- --------------- --------------
Free cash flow 105,293 101,348 528,005 561,784
Add back:
Deferred income taxes 26,887 28,138 81,011 132,031
Non-cash (gains)/losses, net (18,990) 2,471 21,610 17,964
Investment and other income (loss), net
of interest income 2,050 4,401 (15,038) (1,157)
Pension curtailment gain (non-cash) 14,379 - 14,379 -
Cash paid (refunded) for income taxes 737 (2,965) 54,407 5,365
Capital expenditures 113,152 105,450 315,793 268,806
Subtract:
Changes in current assets and liabilities (56,353) (37,744) 41,448 (10,121)
Income tax expense 30,229 23,576 128,014 136,479
Stock based compensation 1,213 2,380 9,022 10,340
Income from discontinued operations - 414 - 18,912
------------- ------------- --------------- --------------
Net cash provided by operating activities $268,419 $ 250,217 $ 821,683 $ 829,183
============= ============= =============== ==============
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises, Inc.
(CTE) for approximately $1.1 billion, and on October 31, 2007, we acquired
Global Valley Networks Inc. and GVN Services (together GVN) for $62.0
million, and have included the historical results of CTE and GVN from the
dates of acquisition.
5
Schedule B
Reconciliation of Non-GAAP Financial Measures (1)
For the quarter ended December 31, 2007 For the quarter ended December 31, 2006
----------------------------------------------------- ------------------------------------------
(Amounts in thousands)
Severance
Operating Cash Flow and Pension and Early
----------------------- As Curtailment As As Retirement As
Operating Cash Flow Margin Reported Gain Adjusted Reported Costs Adjusted
-------------------------- -------------- --------------------------- ------------------------------------------
Operating Income $ 174,891 $ 14,379 $ 160,512 $ 156,973 $ (3,237) $ 160,210
Add back:
Depreciation and amortization 145,156 - 145,156 117,923 - 117,923
------------- ------------ ------------- ------------ ------------ -------------
Operating cash flow $ 320,047 $ 14,379 $ 305,668 $ 274,896 $ (3,237) $ 278,133
============= ============ ============= ============ ============ =============
Revenue $ 577,228 $ 577,228 $ 504,396 $ 504,396
============= ============= ============ =============
Operating income margin
(Operating income divided by
revenue) 30.3% 27.8% 31.1% 31.8%
============= ============= ============ =============
Operating cash flow margin
(Operating cash flow divided by
revenue) 55.4% 53.0% 54.5% 55.1%
============= ============= ============ =============
For the year ended December 31, 2007 For the year ended December 31, 2006
----------------------------------------------------- ------------------------------------------
Severance Severance
Operating Cash Flow and and Early Pension and Early
----------------------- As Retirement Curtailment As As Retirement As
Operating Cash Flow Margin Reported Costs Gain Adjusted Reported Costs Adjusted
-------------------------- ----------------------------------------------------- ------------------------------------------
Operating Income $ 705,416 $ (13,874) $ 14,379 $ 704,911 $ 644,490 $ (7,193) $ 651,683
Add back:
Depreciation and amortization 545,856 - - 545,856 476,487 - 476,487
------------- ------------ ------------ ------------- ------------ ------------ -------------
Operating cash flow $1,251,272 $ (13,874) $ 14,379 $1,250,767 $1,120,977 $ (7,193) $1,128,170
============= ============ ============ ============= ============ ============ =============
Revenue $2,288,015 $2,288,015 $2,025,367 $2,025,367
============= ============= ============ =============
Operating income margin
(Operating income divided by
revenue) 30.8% 30.8% 31.8% 32.2%
============= ============= ============ =============
Operating cash flow margin
(Operating cash flow divided by
revenue) 54.7% 54.7% 55.3% 55.7%
============= ============= ============ =============
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises, Inc.
(CTE) for approximately $1.1 billion, and on October 31, 2007, we acquired
Global Valley Networks Inc. and GVN Services (together GVN) for $62.0
million, and have included the historical results of CTE and GVN from the
dates of acquisition.
6