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): July 11, 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 5. Other Events
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On July 11, 2004, Citizens Communications Company issued a press
release. A copy of the press release is attached hereto as Exhibit
99.1.
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
Senior Vice President and
Chief Financial Officer
Date: July 12, 2004
Exhibit 99.1
Citizens Communications
3 High Ridge Park
Stamford, CT 06905
203.614.5600
Web site: www.czn.net
Company Contacts:
Jerry Elliott Michael A. Zarrella
Chief Financial Officer Vice President Corporate Development
203.614.6722 203.614.5179
je@czn.com mzarrell@czn.com
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Citizens Communications Announces Plan to Pay Special Dividend of $2 per Share
And Institute Annual Dividend of $1 per Share;
Leonard Tow to Step Down as CEO;
Will be Succeeded by Rudy Graf Until Conclusion of Search
Stamford, Conn., July 11, 2004 -- Citizens Communications Company (NYSE:CZN)
today announced that its Board of Directors has completed its review of
financial and strategic alternatives. After extensive analysis of the range of
alternatives by the board and its financial and legal advisors, the Board and
management have determined that the best alternative for enhancing shareholder
value is to capitalize on the company's strong free cash flow by returning
significant cash to shareholders by paying a special dividend of $2 per common
share and instituting a regular annual dividend of $1 per common share which
will be payable quarterly.
Today's announcement reflects the Board's commitment to distributing a
significant portion of Citizens' free cash flow to shareholders on a continuing
basis. The company will continue to drive free cash flow through further growth
of broadband and value added services, capitalizing on opportunities to provide
customers additional services, productivity improvements, and a disciplined
capital expenditure program that emphasizes return on investment while
continuing to support growth initiatives.
The dividend policy announced today will provide an ongoing dividend stream to
shareholders while enabling the company to maintain a strong balance sheet. The
special dividend and first quarterly dividend will be paid out of cash balances
and no debt will be incurred as a result of paying these dividends. Future free
cash flows in excess of dividends will be used for general corporate purposes,
which may include debt reduction, repurchase of stock or growth opportunities.
All internal and external opportunities will be evaluated in light of the
dividend policy.
Leonard Tow, chairman of the board, said, "I am highly confident that at the end
of the financial and strategic review we have made the right decision to enhance
the value of the company and its cash flow."
The company today reaffirmed its previously announced financial guidance for
2004, excluding the charges referred to below. The annual dividend of $1 per
share represents a pay out of approximately 73% of expected free cash flow for
2004 excluding such charges and assuming conversion of all of the company's
equity units and EPPICS (which would result in a total of approximately 338
million common shares outstanding, using the mid-point of the range of the
conversion price of the equity units). The actual number of shares outstanding
that are entitled to the dividends will depend on the conversion price of the
equity units (which will be determined in August) and the number of EPPICS that
are converted to common stock.
The $2 per share special dividend as well as the first quarterly dividend of
$0.25 per share will be paid on September 2, 2004 to stockholders of record on
August 18, 2004.
The remarketing of the debt component of the company's equity units is expected
to be completed shortly after the release of the company's second quarter
results, which will be in early August.
As Citizens moves into the next phase of its evolution, Dr. Tow has decided to
step down from his position as chief executive officer, effective immediately,
and resign his position as chairman of the board by the end of the year. The
Board of Directors has named Rudy J. Graf, currently a director and former
president and chief operating officer of Citizens, to serve as CEO and President
on an interim basis.
The Board has established a search committee, consisting of Mr. Graf, Robert A.
Stanger, and David H. Ward, and intends to engage an executive search firm to
identify qualified candidates to fill the role of CEO. Mr. Graf has told the
board that he will serve until a new CEO has been named.
In making its announcement about the executive changes, the Board of Directors
thanked Mr. Graf for returning to his leadership role in the company and
expressed its appreciation to Dr. Tow for his service:
"We appreciate Rudy's willingness to return to this leadership role and believe
his deep knowledge of the company and strong relationships throughout the
industry will serve the company well and provide continuity during this
transition. We are grateful to Leonard for his vision both inside the company
and in the community with his many civic and charitable activities, and express
our deep appreciation. He has proven to be one of the key figures in our
industry and we have benefited greatly from his stewardship during the 14 years
he was CEO."
Mr. Graf said, "I look forward to working with Len to assure a smooth transition
during this change in management. The company's strengths lie in its franchise
and with its dedicated employees who have helped Citizens become one of the
leading RLECs in the country."
Dr. Tow said, "The Board and I have come to the conclusion that after 14 years
as CEO it is the right time for me to step down. I have been privileged to work
with some of the most talented and dedicated people in the business here at
Citizens, and look forward to many more years of success for the company. During
the next six months I will work with Rudy to assure a smooth and orderly
succession."
As previously announced, Scott N. Schneider has stepped down as president and
chief operating officer. Mr. Schneider will remain on the Board of Directors.
In connection with the completion of the review of alternatives and the
management succession described above, the company expects third quarter results
to include a pre-tax charge of approximately $75 million to $80 million, of
which approximately $31 million will be non-cash.
The company was advised in its review of financial and strategic alternatives by
J.P. Morgan Securities Inc., Morgan Stanley and Simpson Thacher & Bartlett LLP.
Management will hold a call to discuss the matters described in this press
release at 9:00 am EDT tomorrow, July 12. The call may be accessed at
800-437-2398. A replay of the call will be available until July 16, 2004 and may
be accessed at 800-839-6713, passcode number 6470913.
Biography of Mr. Graf
Mr. Graf is the retired vice-chairman, president and chief operating officer of
Citizens Communications, and serves on its Board of Directors. From 1990 to
1999, he served as president and chief operating officer and director of
Centennial Cellular, a company he helped found in partnership with Citizens and
Century Communications. Centennial Cellular was sold to Welsh, Carson, Anderson
& Stowe and The Blackstone Group in 1999. He began his career with AT&T/New
Jersey Bell in 1972. He also serves on the board of Ntelos, a telecommunications
services company based in Wainsborough, VA.
Biography of Dr. Tow
Leonard Tow has been chairman and chief executive officer of Citizens
Communications since 1990, and was its chief financial officer from October 1991
through November 1997. Dr. Tow is also a director of Hungarian Telephone and
Cable Corp., and a member of the Board of Directors of the United States
Telephone Association. He was a director and chief executive officer of Century
Communications Corp., a cable television company, from its incorporation in 1973
and chairman of its Board of Directors from October 1989 until October 1999. Dr.
Tow was also founder and a director of Centennial Cellular Corp.
Prior to 1973, Dr. Tow was senior vice president, corporate development and
planning for Teleprompter Corp. and a management consultant with Touche Ross &
Co. He holds a Bachelor of Arts from Brooklyn College and earned Masters and
Doctorate degrees from Columbia University. Dr. Tow served for several years as
distinguished adjunct professor at New York University's School of Business. In
1998, Brooklyn College and the City University of New York awarded Dr. Tow a
Doctorate of Humane Letters.
Dr.Tow serves on the boards of the Young Concert Artists, Inc., the American
Ballet Theater, the Silvermine (Conn.) Art Center, The Brooklyn College
Foundation, Inc., The Tow Foundation, and AmeriCares Chairman's Council.
The company uses certain non-GAAP financial measures in evaluating its
performance. These include free cash flow. 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, 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 (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 stock repurchases 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.
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