Exhibit 99.1
Citizens Communications
3 High Ridge Park
Stamford, CT 06905
203.614.5600
Web site: www.czn.com
Contact:
David Whitehouse
Senior Vice President & Treasurer
203.614.5708
david.whitehouse@czn.com
Citizens Communications Reports Solid 2008 First-Quarter Results
* Data and internet services revenue up 24% year over year
* 20,200 high speed internet additions
* Continued strong operating income and cash flow margins
* 2008 free cash flow guidance increased
* First quarter dividend payout ratio of 48%
* Dish Network video customers exceed 100,000
Stamford, Conn., May 5, 2008 -- Citizens Communications (NYSE:CZN) today
reported first quarter 2008 revenue of $569.2 million, operating income of
$164.3 million, and net income of $45.6 million.
"Citizens Communications had solid financial and operating results for the first
quarter of 2008," said Maggie Wilderotter, Chairman and CEO. "Our first quarter
performance is a direct result of our ongoing primary focus on keeping
customers, upgrading them to new products and services and putting new customers
on service. As a result of continued effective expense management we achieved an
operating cash flow margin of 53.7%. Adjusted to exclude severance and early
retirement costs, our operating cash flow margin would have been 54.2%. We
continue to build on our successful promotional initiatives to increase the
penetration of High- Speed Internet and other bundled product offerings,
including the roll-out of our "Peace of Mind" product suite."
Revenue for the first quarter of 2008 was $569.2 million, as compared to $556.1
million in the first quarter of 2007, a 2 percent increase. The 2008 period
includes $62.0 million of additional revenues in the aggregate contributed by
the operations of Commonwealth Telephone Enterprises, which was acquired on
March 8, 2007, and Global Valley Networks, which was acquired on October 31,
2007. The 2007 period includes the favorable one-time impact to access revenues
of $38.7 million due to the settlement of a switched access dispute. Excluding
the additional revenue due to the Commonwealth and Global Valley acquisitions
and the one-time favorable settlement in the first quarter of 2007, revenue for
the first quarter of 2008 would have declined by $10.2 million, or 2 percent, as
compared to the first quarter of 2007. Our revenue declined as a result of lower
access lines, subsidy revenue and switched access revenue, partially offset by a
$12.7 million increase in data and internet services revenue.
Other operating expenses and network access expenses for the first quarter of
2008 were $263.8 million, as compared to $240.7 million in the first quarter of
2007. The increase of $23.1 million in 2008 as compared to the first quarter of
2007 is primarily the result of $21.5 million in additional expenses
attributable to the acquired operations of Commonwealth and Global Valley. The
purchases of Commonwealth and Global Valley have enabled the Company to leverage
its centralized back office, customer service and administrative support
functions over a larger customer base.
Depreciation and amortization expense for the first quarter of 2008 was $141.1
million, as compared to $122.2 million in the first quarter of 2007, a 15
percent increase, reflecting the impact of a larger asset base due to the 2007
acquisitions, partially offset by a declining net asset base for our legacy
Citizens properties.
Operating income for the first quarter of 2008 was $164.3 million and operating
income margin was 28.9 percent, as compared to operating income of $193.3
million and operating income margin of 34.8 percent in the first quarter of
2007. The first quarter 2008 decrease of $29.0 million is primarily the result
of the favorable one-time impact of $38.7 million in revenue recognized in the
first quarter of 2007 from the settlement of a switched access dispute.
Investment and other (loss) income, net reflects the premium paid of $6.3
million to repurchase a portion of the Company's 9.25% Senior Notes due 2011.
The Company lost approximately 43,100 access lines, of which 15 percent were
second lines, during the first quarter of 2008 and had more than 2,387,100
access lines at March 31, 2008.
The Company added approximately 20,200 high-speed internet customers during the
first quarter of 2008 and had more than 543,000 high-speed internet customers at
March 31, 2008. The Company added approximately 7,800 video customers during the
first quarter of 2008 and had more than 101,400 video customers at March 31,
2008.
Capital expenditures were $48.0 million for the first quarter of 2008.
Free cash flow was $172.8 million for the first quarter of 2008. The Company's
dividend represents a payout of 48 percent of free cash flow for the first
quarter of 2008.
During the first quarter of 2008, the Company repurchased 2,317,000 shares of
its common stock for $24.8 million. In addition, during the first quarter, the
Company repurchased $128.7 million principal amount of its 9.25% Senior Notes
due 2011 for $135.0 million, and also retired all of its outstanding interest
rate swap agreements.
The Company has increased its free cash flow estimate for 2008 to approximately
$470.0 million to $495.0 million after calculating the impact, preliminarily,
that the "Economic Stimulus Act of 2008" will have on its cash paid for income
taxes.
-MORE-
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
GAAP 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 the 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 $38.7 million in access revenue for the favorable impact of the one-time
carrier dispute settlement in the first quarter of 2007, and $2.9 million and
$0.2 million of severance and early retirement costs in the first quarter of
2008 and 2007, respectively, because the Company believes that the magnitude of
such revenues in the first quarter of 2007 is unusual, and such costs in the
first quarter of 2008 materially exceeds the comparable costs in the first
quarter of 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 5,800 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 credit markets and/or 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 alternative minimum tax (AMT) credit carryforwards, that were
generated in prior years, 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
March 31,
---------------------------- %
(Amounts in thousands, except per share amounts) 2008 2007 Change
------------------------------------------
Income Statement Data
Revenue $569,205 $556,147 (2) 2%
------------ ------------
Network access expenses 60,549 51,397 18%
Other operating expenses 203,264 189,267 7%
Depreciation and amortization 141,080 122,181 15%
------------ ------------
Total operating expenses 404,893 362,845 12%
------------ ------------
Operating income 164,312 193,302 -15%
Investment and other (loss) income, net (3) (1,235) 10,017 -112%
Interest expense 90,860 93,964 -3%
------------ ------------
Income before income taxes 72,217 109,355 -34%
Income tax expense 26,628 41,688 -36%
------------ ------------
Net income attributable to common shareholders $ 45,589 $ 67,667 -33%
============ ============
Weighted average shares outstanding 326,173 326,542 0%
Basic net income per share attributable to
common shareholders (4) $ 0.14 $ 0.21 (2) -33%
Other Financial Data
Capital expenditures $ 47,986 $ 45,111 6%
Operating cash flow (5) 305,392 315,483 -3%
Free cash flow (5) 172,810 187,555 -8%
Dividends paid 82,103 85,462 -4%
Dividend payout ratio (6) 48% 46% 4%
(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) Includes the $38.7 million favorable impact of a carrier dispute
settlement, representing $.07 per share.
(3) Includes $6.3 million for premium on debt repurchases and $4.0 million for
bridge loan fee for the quarters ended March 31, 2008 and 2007,
respectively.
(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
March 31,
----------------------------- %
(Amounts in thousands, except operating data) 2008 2007 Change
---------------------------------------------
Select Income Statement Data
Revenue
Local services $ 217,158 $ 204,444 (2) 6%
Data and internet services 145,982 118,024 (2) 24%
Access services 107,818 139,024 (3) -22%
Long distance services 46,453 40,428 15%
Directory services 28,628 28,670 0%
Other 23,166 25,557 -9%
------------- --------------
Total revenue 569,205 556,147 2%
------------- --------------
Expenses
Network access expenses 60,549 51,397 (2) 18%
Other operating expenses (4) 203,264 189,267 (2) 7%
Depreciation and amortization 141,080 122,181 15%
------------- --------------
Total operating expenses 404,893 362,845 12%
------------- --------------
Operating Income $ 164,312 $ 193,302 -15%
============= ==============
Other Financial and Operating Data
Employees 5,828 6,355 -8%
Access lines (5) 2,387,108 2,538,471 -6%
High-speed internet (HSI) subscribers (5) 543,020 464,056 17%
Video subscribers 101,410 76,009 33%
Switched access minutes of use (in millions) 2,602 2,528 3%
Average monthly revenue per average
access line $ 78.77 $ 84.38 (6) -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.
(2) Reflects a reclassification of $1.6 million of revenue related to our CTE
acquisition from local services to data and internet services. Also,
expenses reflect a reclassification of $0.6 million of expenses related to
our CTE acquisition from other operating expenses to network access
expenses.
(3) Includes the $38.7 million favorable impact of a carrier dispute
settlement.
(4) For the quarter ended March 31, 2008 and 2007, includes severance and early
retirement costs of $2.9 million and $0.2 million, respectively.
(5) Access lines and high-speed internet subscribers as of December 31, 2007
have been revised by 1,500 to 2,430,177 and by 1,000 to 522,845,
respectively, arising from the GVN billing system conversion.
(6) For the quarter ended March 31, 2007, the calculation excludes CTE and GVN
data and includes the $38.7 million favorable one-time impact from the
settlement of a switched access dispute. The amount is $78.29 without the
$38.7 million favorable one-time impact from the settlement.
2
Citizens Communications Company
Condensed Consolidated Balance Sheet Data (1)
(Amounts in thousands)
March 31, 2008 December 31, 2007
-------------------- -------------------
ASSETS
------
Current assets:
Cash and cash equivalents $ 227,634 $ 226,466
Accounts receivable and other current assets 266,893 297,688
-------------------- -------------------
Total current assets 494,527 524,154
Property, plant and equipment, net 3,288,135 3,335,244
Other long-term assets 3,345,939 3,396,671
-------------------- -------------------
Total assets $ 7,128,601 $ 7,256,069
==================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Long-term debt due within one year $ 3,814 $ 2,448
Accounts payable and other current liabilities 364,954 443,443
-------------------- -------------------
Total current liabilities 368,768 445,891
Deferred income taxes and other liabilities 1,072,780 1,075,382
Long-term debt 4,747,265 4,736,897
Shareholders' equity 939,788 997,899
-------------------- -------------------
Total liabilities and shareholders' equity $ 7,128,601 $ 7,256,069
==================== ===================
(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 three months ended March 31,
-----------------------------------------
2008 2007
----------------- -------------------
Cash flows provided by (used in) operating activities:
Net income $ 45,589 $ 67,667
Adjustments to reconcile income to net cash provided
by operating activities:
Depreciation and amortization expense 141,080 122,181
Stock based compensation expense 3,019 3,407
Losses on extinguishment of debt 6,290 4,026
Other non-cash adjustments (1,413) 2,982
Deferred income taxes (282) 23,614
Change in accounts receivable 19,057 10,366
Change in accounts payable and other liabilities (70,261) (57,242)
Change in other current assets (1,568) (1,714)
----------------- -------------------
Net cash provided by operating activities 141,511 175,287
Cash flows provided from (used by) investing activities:
Capital expenditures (47,986) (45,111)
Cash paid for Commonwealth acquisition, net - (649,507)
Other assets (purchased) distributions received, net 654 571
----------------- -------------------
Net cash used by investing activities (47,332) (694,047)
Cash flows provided from (used by) financing activities:
Long-term debt borrowings 135,000 950,000
Long-term debt payments (129,332) (327,815)
Settlement of interest rate swaps 15,521 -
Debt issuance costs (857) (13,841)
Premium paid to retire debt (6,290) -
Issuance of common stock 591 5,119
Dividends paid (82,103) (85,462)
Common stock repurchased (24,784) (12,016)
Repayment of customer advances for construction (757) (602)
----------------- -------------------
Net cash (used by) provided from financing activities (93,011) 515,383
Increase (decrease) in cash and cash equivalents 1,168 (3,377)
Cash and cash equivalents at January 1, 226,466 1,041,106
----------------- -------------------
Cash and cash equivalents at March 31, $ 227,634 $ 1,037,729
================= ===================
Cash paid during the period for:
Interest $ 121,396 $ 97,416
Income taxes $ 1,859 $ 6,786
(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 ended March 31,
-----------------------------------
(Amounts in thousands) 2008 2007
----------------- ----------------
Net Income to Free Cash Flow;
-----------------------------
Net Cash Provided by Operating Activities
-----------------------------------------
Net income $ 45,589 $ 67,667
Add back:
Depreciation and amortization 141,080 122,181
Income tax expense 26,628 41,688
Stock based compensation 3,019 3,407
Subtract:
Cash paid for income taxes 1,859 6,786
Other (loss) income, net (2) (6,339) (4,509)
Capital expenditures 47,986 45,111
----------------- ----------------
Free cash flow 172,810 187,555 (3)
Add back:
Deferred income taxes (282) 23,614
Non-cash (gains)/losses, net 7,896 10,415
Other (loss) income, net (2) (6,339) (4,509)
Cash paid for income taxes 1,859 6,786
Capital expenditures 47,986 45,111
Subtract:
Changes in current assets and liabilities 52,772 48,590
Income tax expense 26,628 41,688
Stock based compensation 3,019 3,407
----------------- ----------------
Net cash provided by operating activities $ 141,511 $ 175,287
================= ================
(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) Includes $6.3 million for premium on debt repurchases and $4.0 million for
bridge loan fee for the quarters ended March 31, 2008 and 2007,
respectively.
(3) Includes the $38.7 million favorable impact of a carrier dispute
settlement.
5
Schedule B
Reconciliation of Non-GAAP Financial Measures (1)
For the quarter ended March 31, 2008 For the quarter ended March 31, 2007
---------------------------------------- -------------------------------------------------------
(Amounts in thousands)
Severance Severance
Operating Cash Flow and and Early Carrier and Early
----------------------- As Retirement As As Dispute Retirement As
Operating Cash Flow Margin Reported Costs Adjusted Reported Settlement Costs Adjusted
-------------------------- ------------- -------------------------- -------------------------------------------------------
Operating Income $ 164,312 $ (2,891) $ 167,203 $ 193,302 $ 38,700 $ (182) $ 154,784
Add back:
Depreciation and amortization 141,080 - 141,080 122,181 - - 122,181
------------- ------------ ------------- ------------ ----------- ------------ -------------
Operating cash flow $ 305,392 $ (2,891) $ 308,283 $ 315,483 $ 38,700 $ (182) $ 276,965
============= ============ ============= ============ =========== ============ =============
Revenue $ 569,205 $ 569,205 $ 556,147 $ 38,700 $ 517,447
============= ============= ============ =========== =============
Operating income margin
(Operating income divided by
revenue) 28.9% 29.4% 34.8% 29.9%
============= ============= ============ =============
Operating cash flow margin
(Operating cash flow divided by
revenue) 53.7% 54.2% 56.7% 53.5%
============= ============= ============ =============
(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