SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): March 4, 2004
CITIZENS COMMUNICATIONS COMPANY
(Exact name of registrant as specified in its charter)
Delaware 001-11001 06-0619596
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
3 High Ridge Park
Stamford, Connecticut 06905
(Address of Principal Executive Offices)
(203) 614-5600
(Registrant's Telephone Number,
Including Area Code)
No Change Since Last Report
---------------------------
(Former name or former address, if changed since last report)
ITEM 12. Disclosure of Results of Operations and Financial Condition
-----------------------------------------------------------
On March 4, 2004, Citizens Communications Company issued a press
release. A copy of the press release is attached hereto as Exhibit
99.1.
The information in this Form 8-K and the Exhibits attached hereto
shall not be deemed "filed" for purposes of Section 18 of the
Securities and Exchange Act of 1934 (the "Exchange Act") or otherwise
subject to the liabilities of that section, nor shall it be deemed
incorporated by reference in any filing under the Securities Act of
1933 or the Exchange Act, except as expressly set forth by specific
reference in such a filing.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CITIZENS COMMUNICATIONS COMPANY
(Registrant)
By: /s/ Jerry Elliott
--------------------------------
Jerry Elliott
Chief Financial Officer
Date: March 4, 2004
Citizens Communications
3 High Ridge Park
Stamford, CT 06905
203.614.5600
Web site: www.czn.net
-------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE
Contacts:
Brigid M. Smith Michael A. Zarrella
Assistant Vice President Vice President
Corporate Communications Corporate Development
203.614.5042 203.614.5179
bsmith@czn.com mzarrell@czn.com
-------------- ----------------
Citizens Communications Reports
2003 Fourth-Quarter Results
Stamford, Conn., March 4, 2004 -- Citizens Communications (NYSE:CZN) today
reported fourth quarter 2003 consolidated revenues of $554.1 million,
consolidated operating income of $125.0 million, and consolidated net income of
$15.0 million. Consolidated net income for the quarter includes an $11.3 million
impairment charge related to the Vermont Electric division, a loss of $8.7
million related to post-closing purchase price adjustments on the sale of
utility assets, a gain of $6.6 million as a result of a settlement of previously
reserved telecommunications bankruptcy receivables, and a non-cash gain of $3.7
million from the extinguishment of capital lease obligations at Electric
Lightwave.
The company produced free cash flow of $112.6 million for the fourth quarter
2003 and $478.1 million for the full year 2003. The company retired $104.2
million of debt during the quarter and ended the quarter with $583.7 million in
cash. The company retired $726.6 million of debt and reduced its net debt
balance by $923.1 million (or 20 percent) during the full year 2003. For the
full year 2003 the company reported net cash provided by continuing operating
activities of $732.3 million, net cash provided from investing activities of
$108.5 million and net cash used by financing activities of $650.3 million.
Fourth quarter 2003 revenue from the company's ILEC operations was $505.6
million, down $14.8 million or 2.8 percent from $520.4 million in the fourth
quarter of 2002. The decrease is due primarily to reduced network access
services revenues, lower long distance revenue, loss of access lines and the
sale of approximately 11,000 access lines in North Dakota in April 2003. These
decreases were partially offset by continued increases in enhanced service and
data revenues.
The company added a record 14,800 DSL customers during the quarter and had more
than 120,000 DSL subscribers at December 31, 2003. The company's primary access
line count, which does not take into account DSL subscriptions, decreased 17,700
lines during the quarter.
Citizens Communications Company Page 2
March 4, 2004
ILEC operating income for the fourth quarter of 2003 was $134.7 million and
operating income margin was 26.6 percent, compared to ILEC operating income of
$89.2 million and operating income margin of 17.1 percent in the fourth quarter
of 2002.
Capital expenditures for the ILEC were $82.8 million for the fourth quarter 2003
and were $244.1 million for the full year 2003.
Fourth quarter 2003 revenue from Electric Lightwave totaled $40.2 million,
operating income was $3.1 million, and capital expenditures were $3.0 million.
The company uses certain non-GAAP financial measures in evaluating its
performance. These include free cash flow. A reconciliation of the differences
between these non-GAAP financial measures 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.
Free cash flow is operating income plus depreciation and amortization,
restricted stock based compensation and loss on impairment charges minus cash
taxes, interest expense and capital expenditures.
The company believes that presentation of these non-GAAP financial measures
provides useful information to investors regarding the company's financial
condition and results of operations because these measures, when used in
conjunction with related GAAP financial measures, (i) together provide a more
comprehensive view of the company's core operations and ability to generate cash
flow, (ii) provide investors with the financial analytical framework upon which
management bases financial, operational, compensation and planning decisions,
and (iii) presents measurements that investors and rating agencies have
indicated to management are useful to them in assessing the company and its
results of operations. Management uses these non-GAAP financial measures to plan
and measure the performance of its core operations and its divisions measure
performance and report to management based upon these measures. In addition, the
company believes that free cash flow, as the company defines it, can assist in
comparing performance from period to period, without taking into account factors
affecting cash flow reflected in the statement of cash flows, including changes
in working capital and the timing of purchases and payments.
Management uses these non-GAAP financial measures to (i) assist in analyzing the
company's underlying financial performance from period to period, (ii) evaluate
the financial performance of its business units, (iii) analyze and evaluate
strategic and operational decisions, (iv) establish criteria for compensation
decisions, and
Citizens Communications Company Page 3
March 4, 2004
(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 are not deducted from such measure.
Management compensates for the shortcomings of these measures by utilizing them
in conjunction with their comparable GAAP financial measures. The information in
this press release should be read in conjunction with the financial statements
and footnotes contained in our documents to be filed with the U.S. Securities
and Exchange Commission.
About Citizens Communications
More information about Citizens can be found at www.czn.net.
This document contains forward-looking statements that are subject to risks and
uncertainties that could cause actual results to differ materially from those
expressed or implied in the statements. These and all forward-looking statements
(including oral representations) are only predictions or statements of current
plans that are constantly under review by the company. All forward-looking
statements may differ from actual results. The foregoing information should be
read in conjunction with the company's filings with the U.S. Securities and
Exchange Commission including, but not limited to, reports on Forms 10-K and
10-Q. The company does 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
(unaudited)
For the quarter ended For the year ended
December 31, December 31,
-------------------------- % ---------------------------- %
(Amounts in thousands - except per-share amounts) 2003 2002 Change 2003 2002 Change
---------------------------------- ------------------------------------
Income Statement Data
Continuing operations
Revenue $ 554,085 $ 658,728 -16% $2,444,938 $2,669,332 -8%
Cost of services (exclusive of depreciation and
amortization 57,064 119,101 -52% 369,689 476,920 -22%
Other operating expenses 210,329 236,611 -11% 893,199 995,326 -10%
Restricted stock based compensation 2,832 4,786 -41% 8,552 7,029 22%
Depreciation and amortization (1) 154,491 191,359 -19% 595,276 755,522 -21%
Reserve for telecommunications bankruptcies (6,637) (6,925) -4% (4,377) 10,880 -140%
Restructuring and other expenses (263) 15,274 -102% 9,687 37,186 -74%
Loss on impairment (2) 11,300 - 100% 15,300 1,074,058 -99%
Operating income (loss) 124,969 98,522 27% 557,612 (687,589) 181%
Investment and other income (loss), net 7,989 (20,592) 139% 74,913 (85,620) 187%
Gain/(loss) on sales of assets, net (8,700) 7,897 -210% (20,492) 9,798 -309%
Interest expense (includes dividends on preferred
securities) 99,240 112,516 -12% 422,734 474,439 -11%
Income tax expense (benefit) 10,066 9,814 3% 67,216 (414,874) 116%
Loss from discontinued operations, net of tax - - - - (1,478) 100%
Gain on disposal of water segment, net of tax - 12,043 -100% - 181,369 -100%
Cumulative effect of change in accounting principle (3) - - - 65,769 (39,812) 265%
Net income (loss) attributable to common shareholders 14,952 (24,460) 161% 187,852 (682,897) 128%
Weighted average shares outstanding 283,095 281,096 1% 282,434 280,686 1%
Net income (loss) attributable to common shareholders $ 0.05 $ (0.09) 156% $ 0.67 $ (2.43) 128%
Other Financial Data (4)
Total capital expenditures (5) $ 86,357 $ 114,539 -25% $ 278,015 $ 358,742 -23%
Free cash flow 112,569 65,761 71% 478,140 333,460 43%
Total debt (6) 4,283,631 5,016,272 -15% 4,283,631 5,016,272 -15%
Less: Cash and cash equivalents 583,671 393,177 48% 583,671 393,177 48%
Net debt 3,699,960 4,623,095 -20% 3,699,960 4,623,095 -20%
(1) Includes $10,577,000 and $23,379,000 of accelerated depreciation for the
quarter and year ended December 31, 2002, respectively, related to the
closing of our Plano, Texas facility.
(2) Shown as the pre-tax amount.
(3) 2003 represents the effect of adoption of SFAS No. 143. 2002 represents the
write-off of ELI's goodwill. Both are net of tax.
(4) A reconciliation of these non-GAAP measures to the most comparable GAAP
measure is presented at the end of these tables.
(5) 2002 excludes $110,000,000 of previously leased facilities purchased by ELI
in April 2002.
(6) Excludes equity units and convertible preferred stock. Total debt includes
current portion of long term debt.
Citizens Communications Company
Financial and Operating Data
(unaudited)
For the quarter ended For the year ended
December 31, December 31,
----------------------------- % --------------------------- %
(Dollars in thousands, except operating data) 2003 2002 Change 2003 2002 Change
-------------------------------------- --------------------------------------
TELECOMMUNICATIONS
Select Income Statement Data
Revenue
Network access services $ 163,526 $ 174,614 -6% $ 667,042 $ 691,894 -4%
Local network services 214,490 214,397 - 859,002 850,319 1%
Long distance and data services 76,519 76,902 - 306,834 299,326 3%
Directory services 26,339 25,885 2% 106,934 104,383 2%
Other 24,725 28,613 -14% 101,123 116,983 -14%
ILEC revenue 505,599 520,411 -3% 2,040,935 2,062,905 -1%
Electric Lightwave 40,161 41,234 -3% 165,389 175,079 -6%
Total revenue 545,760 561,645 -3% 2,206,324 2,237,984 -1%
Expenses
Network access expense 51,731 60,688 -15% 223,547 235,462 -5%
Other operating expenses 206,036 208,383 -1% 826,958 881,696 -6%
Restricted stock based compensation 2,638 4,539 -42% 8,275 6,864 21%
Depreciation and amortization (1) 154,491 191,351 -19% 595,276 755,158 -21%
Reserve for telecommunications bankruptcies (6,637) (6,925) -4% (4,377) 10,880 -140%
Restructuring and other expenses (263) 15,274 -102% 9,687 37,186 -74%
Loss on impairment (2) - - - - 656,658 -100%
Total expenses 407,996 473,310 -14% 1,659,366 2,583,904 -36%
Operating Income (Loss)
ILEC $ 134,712 $ 89,174 51% $ 537,248 $ 413,241 30%
ELI 3,052 (839) 464% 9,710 (759,161) 101%
Other Financial and Operating Data
ILEC capital expenditures $ 82,829 $ 83,818 -1% $ 244,089 $ 288,823 -15%
ELI capital expenditures (3) 2,982 3,800 -22% 9,496 12,003 -21%
ILEC access lines (4) 2,386,456 2,444,423 -2% 2,386,456 2,444,423 -2%
DSL subscribers 120,461 71,058 70% 120,461 71,058 70%
ILEC switched access minutes of use (in
millions) 2,922 3,069 -5% 11,971 12,252 -2%
ILEC average monthly revenue per average
line $ 70.37 $ 70.75 -1% $ 70.43 $ 69.80 1%
(1) See footnote (1) on first page.
(2) See footnote (2) on first page.
(3) See footnote (5) on first page.
(4) On April 1, 2003 and October 31, 2002, we completed the sale of
approximately 11,000 and 4,000 telephone access lines, respectively, in the
state of North Dakota. These sales affect the comparability of data
presented.
Citizens Communications Company
Financial and Operating Data
(unaudited)
For the quarter ended For the year ended
December 31, December 31,
---------------------------- % -------------------------- %
(Dollars in thousands) 2003 2002 Change 2003 2002 Change
------------------------------------- -------------------------------------
GAS AND ELECTRIC SECTORS (1)
Select Income Statement Data
Revenue $ 8,325 $ 97,083 -91% $ 238,614 $ 431,348 -45%
Gas, electric energy and fuel oil purchased 5,333 58,413 -91% 146,142 241,458 -39%
Other operating expenses 4,293 28,228 -85% 66,241 113,630 -42%
Restricted stock based compensation 194 247 -21% 277 165 68%
Depreciation and amortization (2) - 8 -100% - 364 -100%
Loss on impairment 11,300 - 100% 15,300 417,400 -96%
Operating income (loss) (12,795) 10,187 -226% 10,654 (341,669) 103%
Other Financial Data
Capital expenditures 497 9,140 -95% 23,861 39,660 -40%
(1) Our Kauai Electric operations were sold on November 1, 2002. In addition,
The Gas Company in Hawaii division was sold on August 8, 2003, our Arizona
gas and electric divisions were sold on August 11, 2003 and our Vermont
distribution facilities were sold on December 1, 2003. The sales of these
properties affects the comparability of data presented.
(2) Our gas and electric operations are reported as "held for sale."
Accordingly, we ceased to record depreciation expense effective October 1,
2000 and January 1, 2001, respectively.
Citizens Communications Company
Condensed Consolidated Balance Sheet Data
(Dollars in thousands)
December 31, 2003 December 31, 2002
--------------------- --------------------
ASSETS
------
Current assets:
Cash and cash equivalents $ 583,671 $ 393,177
Accounts receivable and other current assets 289,457 360,043
Assets held for sale 23,130 447,764
--------------------- --------------------
Total current assets 896,258 1,200,984
Property, plant and equipment, net 3,525,640 3,690,056
Other long-term assets 3,267,212 3,331,665
--------------------- --------------------
Total assets $ 7,689,110 $ 8,222,705
===================== ====================
LIABILITIES AND EQUITY
----------------------
Current liabilities:
Long-term debt due within one year $ 88,002 $ 58,911
Accounts payable and other current liabilities 432,225 526,142
Liabilities related to assets held for sale 16,128 145,969
--------------------- --------------------
Total current liabilities 536,355 731,022
Deferred income taxes and other liabilities 880,693 700,933
Equity units 460,000 460,000
Long-term debt 4,195,629 4,957,361
Mandatorily Redeemable Convertible Preferred Securities 201,250 201,250
Shareholders' equity 1,415,183 1,172,139
--------------------- --------------------
Total liabilities and equity $ 7,689,110 $ 8,222,705
===================== ====================
Citizens Communications Company
Condensed Consolidated Cash Flow Data
(Dollars in thousands)
For the year ended December 31,
------------------------------------
2003 2002
----------------- -----------------
Income (loss) from continuing operations before extraordinary
expense and cumulative effect of change in accounting principle $ 122,083 $ (822,976)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization expense 595,276 755,522
Investment write-downs - 117,455
Gain on extinguishment of debt (75,569) (26,330)
Investment (gains)/losses - (3,363)
(Gain)/loss on sales of assets, net 20,492 (9,798)
Loss on impairment 15,300 1,074,058
Other 54,743 (447,701)
----------------- -----------------
Net cash provided by continuing operating activities 732,325 636,867
Cash flows from investing activities:
Proceeds from sales of assets, net of selling expenses 388,079 224,678
Capital expenditures (1) (278,015) (468,742)
ELI share purchases - (6,800)
Other (1,612) 9,778
----------------- -----------------
Net cash provided from (used by) investing activities 108,452 (241,086)
Cash flows from financing activities:
Long-term debt principal payments (653,462) (1,062,169)
Other 3,179 10,048
----------------- -----------------
Net cash used by financing activities (650,283) (1,052,121)
Cash provided by discontinued operations - 833,648
Increase in cash and cash equivalents 190,494 177,308
Cash and cash equivalents at January 1, 393,177 215,869
----------------- -----------------
Cash and cash equivalents at December 31, $ 583,671 $ 393,177
================= =================
(1) 2002 includes $110,000 of previously leased facilities purchased by ELI in
April 2002.
Schedule A
Reconciliation of Non-GAAP Financial Measures
For the quarter ended December 31, For the year ended December 31,
---------------------------------- -------------------------------
(Dollars in thousands) 2003 2002 2003 2002
---------------- ---------------- --------------- --------------
Operating Income (Loss) to Free Cash Flow;
------------------------------------------
Net Cash Provided by Continuing Operating Activities
----------------------------------------------------
Operating income (loss) $ 124,969 $ 98,522 $ 557,612 $ (687,589)
Add back:
Depreciation and amortization 154,491 191,359 595,276 755,522
Restricted stock based compensation 2,832 4,786 8,552 7,029
Loss on impairment 11,300 - 15,300 1,074,058
Subtract:
Cash paid (refunded) for income taxes (4,574) 1,851 (2,149) (17,621)
Interest expense 99,240 112,516 422,734 474,439
Capital expenditures 86,357 114,539 278,015 358,742
---------------- ---------------- ---------------- --------------
Free cash flow 112,569 65,761 478,140 333,460
Add back:
Deferred income taxes (14,300) 108,508 77,188 (252,468)
Noncash (gains)/losses 5,020 3,648 (55,077) 77,964
Investment and other income/(loss) 7,989 (20,592) 74,913 (85,620)
Cash paid/(refunded) for income taxes (4,574) 1,851 (2,149) (17,621)
Capital expenditures 86,357 114,539 278,015 358,742
Subtract:
Changes in current assets and liabilities 3,612 129,040 22,445 195,233
(Gain)/loss on sale of assets 8,700 (7,897) 20,492 (9,798)
Income tax expense (benefit) 10,066 9,814 67,216 (414,874)
Restricted stock based compensation 2,832 4,786 8,552 7,029
---------------- ---------------- ---------------- --------------
Net cash provided by continuing operating activities $ 167,851 $ 137,972 $ 732,325 $ 636,867
================ ================ ================ ==============