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): May 14, 2002
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) (Zip Code)
(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 7. Financial Statements, Exhibits
(c) Exhibits
99.1 Press Release of Citizens Communications Company released
May 14, 2002 announcing earnings for the quarter ended March 31,
2002.
99.2 Financial and operating data
Citizens Communications
3 High Ridge Park
Stamford, CT 06905
203.614.5600 www.czn.net
FOR IMMEDIATE RELEASE
Contact: Brigid Smith
A.V.P., Corporate Communications
203.614.5042
bsmith@czn.com
Citizens Communications and Electric Lightwave
Report Financial Results for the First Quarter of 2002
Stamford, Conn., May 14, 2002 - Citizens Communications (NYSE: CZN) and its
subsidiary Electric Lightwave, Inc. (ELI) (NASDAQ: ELIX) today each reported
financial results for the quarter ended March 31, 2002. The following
information should be read in conjunction with the financial statements and
footnotes contained in the Form 10-Qs to be filed tomorrow with the Securities
and Exchange Commission. Certain terms used in this press release are defined at
the end of the release.
For the first quarter of 2002 consolidated revenue was $679.3 million; operating
income from continuing operations was $100.4 million; Adjusted EBITDA from
continuing operations was $290.2 million; capital expenditures totaled $69.6
million; Free Cash Flow was $208.9 million; consolidated net income was $83.2
million; free cash flow per share was 75 cents and net income per share was 30
cents.
Citizens' consolidated results for the first quarter of 2002 include a $309.2
million pre-tax gain on the sale of the company's water utilities; a non-cash
write off of ELI's goodwill of $39.8 million; the write down of Global Crossing
receivables of $7.8 million as a result of Global Crossing filing for
bankruptcy; a non-cash charge of $49.7 million resulting from the decline in
value of the company's investment in Adelphia Communications; and restructuring
and other expenses of $3.9 million related to the company's closing of its
Sacramento call center and its operations support center in Plano, Texas.
Telecommunications - Incumbent Local Exchange Carrier Segment ("ILEC Segment")
First quarter 2002 revenue from the company's ILEC Segment was $508.0 million,
up $220.7 million or 77 percent from $287.3 million in the first quarter of
2001. The June 2001 acquisition of Frontier accounted for $207.2 million of the
increase. Excluding the impact of the Frontier acquisition, the revenue increase
was $13.5 million or five percent above the first quarter of 2001, primarily
related to continued increases in penetration of enhanced services and data
products.
Access lines at March 31, 2002 totaled 2,478,600, a 79 percent increase from
1,387,300 lines at March 31, 2001. Excluding the impact of the Frontier
acquisition, access lines were unchanged from March 31, 2001. In addition to its
access line count, the company added more than 11,000 DSL subscribers during the
first quarter, compared to virtually no additions during the start up phase in
the first quarter of 2001. The company continues to see accelerated growth in
DSL lines as first quarter net additions of 11,000 subscribers exceeded fourth
quarter net additions of 9,100 subscribers by 21 percent.
Adjusted EBITDA for the first quarter of 2002 was $264.3 million, an increase of
$115.3 million or 77 percent compared to the year-ago quarter. The Company's
Adjusted EBITDA margin continues to improve ahead of targets. Sequentially
Adjusted EBITDA increased $10.4 million from the fourth quarter of 2001 and the
Adjusted EBITDA margin increased to 52 percent as compared to 49.7 percent in
the fourth quarter of 2001. These margins reflect an ongoing focus on execution,
ongoing success in the integration of Frontier and the efficiencies achieved
from the combination.
ILEC Segment operating income was $92.2 million, up 47 percent from $62.7
million in the first quarter of 2001. Operating income for the first quarter of
2002 reflects charges of $13.8 million and accelerated depreciation of $11.9
resulting from the closing of the company's facilities in Plano, Texas, and
Sacramento, and operating income for the first quarter of 2001 reflects $5.5
million of acquisition assimilation expenses associated with our completed
acquisitions.
For the 2002 quarter the ILEC Segment had capital expenditures of $55.8 million
compared to $76.6 million of capital expenditures for the quarter ended March
31, 2001. This decrease relates principally to increased scrutiny of
discretionary capital projects in the current economic environment as well as to
normal first quarter seasonality.
Free cash flow for the 2002 quarter was $194.7 million versus $78.1 million in
the fourth quarter of 2001 and $72.5 million in the year ago quarter. The
increase in Free Cash Flow was related to the increase in EBITDA and the decline
in capital expenditures described above.
Competitive Local Exchange Carrier Segment; Electric Lightwave, Inc. (NASDAQ:
ELIX) 2002 first-quarter revenue from ELI totaled $48.2 million, operating loss
was $17.2 million, EBITDA was $2.5 million, and capital expenditures were $4.2
million. EBITDA includes the effect of a $2.1 million one-time favorable item.
ELI's Class A Common Stock is currently traded on the Nasdaq National Market
System, but does not meet minimum bid price and market value of public float
requirements for continued listing. The stock is expected to be delisted from
the Nasdaq National Market in the near future.
Public Services Segment
The gas and electric segments accounted for $124.1 million of first-quarter 2002
consolidated revenue, $25.2 million in EBITDA, $9.6 million of capital
expenditures and $15.7 million of free cash flow.
EBITDA is operating income plus depreciation and amortization. Adjusted EBITDA
is EBITDA plus the write down of Global Crossing receivables and restructuring
expenses. Free cash flow is EBITDA less capital expenditures. EBITDA is a
measure commonly used to analyze companies on the basis of operating
performance. EBITDA is not a measure of financial performance nor is it an
alternative to cash flow as a measure of liquidity and may not be comparable to
similarly titled measures of other companies.
About Citizens Communications
Citizens Communications serves 2.5 million access lines in 24 states. Citizens
owns 85 percent of Electric Lightwave, Inc. (NASDAQ:ELIX), a facilities-based,
integrated communications provider that offers a broad range of services to
telecommunications-intensive businesses throughout the United States.
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 because of, but not limited to,
changes in the local and overall economy, changes in market conditions for debt
and equity securities, the nature and pace of technological changes, the number
and effectiveness of competitors in the company's markets, success in overall
strategy, changes in legal or regulatory policy, changes in legislation, the
company's ability to identify future markets and successfully expand existing
ones, the mix of products and services offered in the company's target markets,
the effects of acquisitions and dispositions and the ability to effectively
integrate businesses acquired. These important factors should be considered in
evaluating any statement contained herein and/or made by the company or on its
behalf. 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
-------------------------------------------------------------------
Mar-02 Mar-02
vs. vs.
March 31, Dec-01 December 31, March 31, Mar-01
(Amounts in thousands - except per-share amounts) 2002 % Change 2001 2001 % Change
------------ ----------- ------------ ----------- ----------
Income Statement Data
Continuing operations (1)
Revenue $ 679,334 2% $ 665,849 $ 624,281 9%
Cost of services 128,238 5% 122,271 226,121 -43%
Other operating expenses (2) 260,854 -4% 271,073 204,571 28%
Depreciation and amortization (3) 178,174 -18% 218,602 105,706 69%
Write-down of Global Crossing receivables (4) 7,804 -63% 21,200 - 100%
Restructuring and other expenses (4) 3,905 -38% 6,325 - 100%
Operating income 100,359 280% 26,378 87,883 14%
Investment and other income (loss), net (48,508) 41% (82,036) 2,784 -1842%
Interest expense (5) 123,603 1% 122,845 63,005 96%
Income tax expense (benefit) (26,942) 58% (63,988) 9,047 -398%
Income (loss) from continuing operations before
cumulative effect of change in accounting principle (44,810) 61% (114,515) 18,615 -341%
Income from discontinued operations, net of tax (1,478) -124% 6,200 1,108 -233%
Gain on disposal of water segment, net of tax 169,326 100% - - 100%
Cumulative effect of change in accounting principle (6) (39,812) 100% - - 100%
Net income (loss) 83,226 177% (108,315) 19,723 322%
Other Financial Data
Adjusted EBITDA from continuing operations (7) $ 290,242 7% $ 272,505 $ 193,589 50%
Total cash capital expenditures 69,599 -61% 180,234 113,969 -39%
Total assets 10,233,610 -3% 10,553,600 6,811,703 50%
Assets held for sale 1,103,657 0% 1,107,937 1,222,773 -10%
Long-term debt (8) 5,453,053 -1% 5,534,906 2,981,496 83%
Total debt (8) 5,914,115 -2% 6,018,812 3,162,711 87%
Less: Cash and short-term investments 972,751 351% 215,869 34,078 2754%
Net debt 4,941,364 -15% 5,802,943 3,128,633 58%
Net debt to current quarter annualized Adjusted
EBITDA 4.3 -19% 5.3 4.0 8%
Interest coverage (8) 2.5 4% 2.4 3.1 -19%
Free cash flow (9) $ 208,934 223% $ 64,746 $ 79,620 162%
Shares of common stock outstanding 281,641 0% 281,289 263,369 7%
Weighted average shares outstanding 280,257 0% 279,675 262,190 7%
Per-Share Data (10)
Income from continuing operations per common share
before cumulative effect of change in accounting
principle $ (0.16) 61% $ (0.41) $ 0.07 -329%
Net income per common share $ 0.30 177% $ (0.39) $ 0.08 275%
Free cash flow per common share (9) $ 0.75 226% $ 0.23 $ 0.30 150%
(1) Includes our Incumbent Local Exchange Carrier (ILEC), Electric Lightwave,
Inc. (ELI) (our Competitive Local Exchange Carrier) and our natural gas and
electric businesses. The natural gas and electric businesses are presented
in continuing operations in the selected income statement data and as
assets held for sale in the balance sheet data.
Continuing operations reflect the elimination of intercompany transactions
(see segment footnote in the SEC Form 10-Q).
(2) Other operating expenses includes $3,715,000 and $5,484,000 of acquisition
assimilation expenses for the quarters ended December 31, 2001 and March
31, 2001, respectively. These expenses are associated with our completed
acquisitions.
(3) Includes $33,977,000 and $10,352,000 of goodwill amortization for the
quarters ended December 31, 2001 and March 31, 2001, respectively.
Amortization of goodwill ceased on January 1, 2002 in accordance with
statement of Financial Accounting Standards No.142.
(4) Represents the write-down of the net realizable value of Global Crossing
receivables as a result of Global's filing for bankruptcy. See footnote 6
in the SEC 10-Q Form for an explanation of restructuring and other
expenses.
(5) Includes $1,553,000 of convertible preferred dividends for each quarter.
(6) As a result of ELI's adoption of Statement of Financial Accounting
Standards No. 142, we recognized a transitional impairment loss, (the
write-off of ELI's goodwill) as a cumulative effect of a change in
accounting principle in the first quarter of 2002.
(7) Adjusted EBITDA is operating income plus depreciation and amortization, the
Global Crossing write-down and restructuring and other expenses. Adjusted
EBITDA is a measure commonly used to analyze companies on the basis of
operating performance. It is not a measure of financial performance under
generally accepted accounting principles and should not be considered as an
alternative to net income as a measure of performance nor an alternative to
cash flow as a measure of liquidity and may not be comparable to similarly
titled measures of other companies (see segment footnote in the SEC Form
10-Q).
(8) Excludes equity units of $460,000,000 for December 31, 2001 and March 31,
2002 and related interest expense. Total debt includes current portion of
long term debt.
(9) Free cash flow is operating income plus depreciation and amortization minus
cash capital expenditures excluding changes in working capital, cash income
taxes for the period and interest expense.
(10) Calculated based on weighted average shares outstanding.
Citizens Communications Company
Financial and Operating Data by Service
For the quarter ended
-----------------------------------------------------------------------------
Mar-02 Mar-02
vs. vs.
(Dollars in thousands, except operating data) March 31, Dec-01 December 31, March 31, Mar-01
ILEC 2002 % Change 2001 2001 % Change
-------------- ----------- --------------- -------------- ----------
Select Income Statement Data
Revenue
Network access services $ 189,787 -2% $ 193,092 $ 132,399 43%
Local network services 190,820 -1% 191,860 100,691 90%
Long distance and data services 73,679 1% 73,130 30,607 141%
Directory services 26,244 3% 25,433 10,690 146%
Other 27,501 1% 27,203 12,957 112%
Total revenue 508,031 -1% 510,718 287,344 77%
Network access expense 43,086 -11% 48,414 17,297 149%
Other operating expenses (1) 200,625 -4% 208,389 120,999 66%
Depreciation and amortization (2) 158,290 -20% 197,570 86,377 83%
Restructuring and other expenses (3) 6,005 180% 2,146 - 100%
Write-down of Global Crossing receivables 7,804 -63% 21,200 - 100%
Total expense 415,810 -13% 477,719 224,673 85%
Operating income 92,221 179% 32,999 62,671 47%
Adjusted EBITDA and Capital Expenditure Data
Adjusted EBITDA (4) $ 264,320 4% $ 253,915 $ 149,048 77%
Adjusted EBITDA margin 52% 4% 50% 52% 0%
Cash capital expenditures 55,769 -63% 152,509 76,582 -27%
Segment free cash flow (5) $ 194,742 149% $ 78,060 $ 72,466 169%
Operating Data
Access lines 2,478,573 0% 2,481,400 1,387,293 79%
Switched access minutes of use (in millions) 3,014 -2% 3,083 1,811 66%
Employees 7,387 -7% 7,920 4,274 73%
Average monthly revenue per average line $ 68.28 0% $ 68.48 $ 69.46 -2%
(1) Other operating expenses includes $3,715,000 and $5,484,000 of acquisition
assimilation expenses for the quarters ended December 31, 2001 and March
31, 2001, respectively. These expenses are associated with our completed
acquisitions.
(2) Includes $11,900,000 and $13,200,000 of accelerated depreciation related to
the closing of our Plano, Texas administrative facility for the quarters
ended March 31, 2002 and December 31, 2001, respectively.
(3) Represents expenses associated with our plan to close our operations
support center in Plano, Texas by August 2002 and the closing of our
Sacramento Customer Care Center in April 2002. See footnote 6 in the SEC
10-Q Form for an explanation of restructuring and other expenses.
(4) Adjusted EBITDA is operating income plus depreciation and amortization, the
Global Crossing write-down and restructuring and other expenses. Adjusted
EBITDA is a measure commonly used to analyze companies on the basis of
operating performance. It is not a measure of financial performance under
generally accepted accounting principles and should not be considered as an
alternative to net income as a measure of performance nor an alternative to
cash flow as a measure of liquidity and may not be comparable to similarly
titled measures of other companies. (see segment footnote in the SEC Form
10-Q).
(5) Segment free cash flow is operating income plus depreciation and
amortization less cash capital expenditures.
Citizens Communications Company
Financial and Operating Data by Service
For the quarter ended
--------------------------------------------------------------------------------
Mar-02 Mar-02
vs. vs.
March 31, Dec-01 December 31, March 31, Mar-01
(Dollars in thousands, except operating data) 2002 % Change 2001 2001 % Change
--------------- ------------ ---------------- -------------- ------------
Electric Lightwave, Inc.
Select Income Statement Data
Revenue
Network services $ 23,787 2% $ 23,372 $ 25,768 -8%
Local telephone services 12,933 -15% 15,177 21,797 -41%
Long distance services 3,082 3% 2,980 3,084 0%
Data services 8,348 -5% 8,790 11,913 -30%
Total revenue 48,150 -4% 50,319 62,562 -23%
Network access expense 15,694 -5% 16,596 16,731 -6%
Restructuring expense (2,100) -150% 4,179 - -100%
Other operating expenses 32,084 11% 28,949 42,538 -25%
Depreciation and amortization 19,652 -4% 20,375 18,894 4%
Total expense 65,330 -7% 70,099 78,163 -16%
Operating loss (17,180) 13% (19,780) (15,601) -10%
Adjusted EBITDA and Capital Expenditure Data
Adjusted EBITDA (1) $ 2,472 315% $ 595 $ 3,293 -25%
Cash capital expenditures 4,247 -60% 10,683 20,334 -79%
Segment free cash flow (2) $ (1,775) 82% $ (10,088) $ (17,041) 90%
Balance Sheet Data
Total assets $ 846,430 -6% $ 902,348 $ 928,399 -9%
Net plant 815,478 -2% 832,704 834,395 -2%
Operating Data
Route miles 7,219 7% 6,754 5,924 22%
Fiber miles 362,624 2% 354,083 296,173 22%
Customers 2,247 0% 2,243 2,228 1%
Employees 810 -2% 823 1,031 -21%
(1) Adjusted EBITDA is operating loss plus depreciation and amortization.
Adjusted EBITDA is a measure commonly used to analyze companies on the
basis of operating performance. It is not a measure of financial
performance under generally accepted accounting principles and should not
be considered as an alternative to net income as a measure of performance
nor an alternative to cash flow as a measure of liquidility and may not be
comparable to similarly titled measures of other companies (see segment
footnote in the SEC Form 10-Q).
(2) Segment free cash flow is Adjusted EBITDA less cash capital expenditures.
Citizens Communications Company
Financial and Operating Data by Service
For the quarter ended
------------------------------------------------------------------------------
Mar-02 Mar-02
vs. vs.
March 31, Dec-01 December 31, March 31, Mar-01
(Dollars in thousands) 2002 % Change 2001 2001 % Change
-------------- ----------- ---------------- ------------- ------------
Gas Sector (1)
Select Income Statement Data
Revenue $ 71,365 40% $ 51,147 $ 220,515 -68%
Gas purchased 43,600 45% 29,996 163,163 -73%
Other operating expenses 15,793 3% 15,296 28,588 -45%
Depreciation and amortization (2) 84 -45% 152 150 -44%
Total expense 59,477 31% 45,444 191,901 -69%
Operating income 11,888 108% 5,703 28,614 -58%
Adjusted EBITDA and Capital Expenditure Data
Adjusted EBITDA (3) $ 11,972 104% $ 5,855 $ 28,764 -58%
Cash capital expenditures 4,379 -45% 7,949 7,407 -41%
Segment free cash flow (4) $ 7,593 463% $ (2,094) $ 21,357 -64%
Balance Sheet Data
Assets held for sale $ 427,160 -3% $ 441,654 $ 668,445 -36%
Net plant 360,554 2% 354,991 541,943 -33%
(1) Our Louisiana and Colorado gas operations were disposed of by sale on July
2, 2001 and November 30, 2001, respectively. The sale of these operations
affects comparability of data presented.
(2) Our gas operations are reported as "held for sale". Accordingly, we ceased
to record depreciation expense effective October 1, 2000.
(3) Adjusted EBITDA is operating income plus depreciation and amortization.
Adjusted EBITDA is a measure commonly used to analyze companies on the
basis of operating performance. It is not a measure of financial
performance under generally accepted accounting principles and should not
be considered as an alternative to net income as a measure of performance
nor an alternative to cash flow as a measure of liquidity and may not be
comparable to similarly titled measures of other companies (see segment
footnote in the SEC Form 10-Q).
(4) Segment free cash flow is Adjusted EBITDA less cash capital expenditures.
Citizens Communications Company
Financial and Operating Data by Service
For the quarter ended
--------------------------------------------------------------------------------------
Mar-02 Mar-02
vs. vs.
March 31, Dec-01 December 31, March 31, Mar-01
(Dollars in thousands) 2002 % Change 2001 2001 % Change
---------------- ------------ ---------------- ---------------- ------------
Electric Sector
Select Income Statement Data
Revenue $ 52,691 -2% $ 53,901 $ 54,697 -4%
Electric energy and fuel oil purchased 26,680 -3% 27,419 29,686 -10%
Other operating expenses 12,741 -35% 19,455 13,312 -4%
Depreciation and amortization (1) - -100% 299 - 0%
Total expense 39,421 -16% 47,173 42,998 -8%
Operating income 13,270 97% 6,728 11,699 13%
Adjusted EBITDA and Capital Expenditure Data
Adjusted EBITDA (2) $ 13,270 89% $ 7,027 $ 11,699 13%
Cash capital expenditures 5,204 -37% 8,276 9,646 -46%
Segment free cash flow (3) $ 8,066 746% $ (1,249) $ 2,053 293%
Balance Sheet Data
Assets held for sale $ 676,497 2% $ 666,283 $ 554,328 22%
Net plant 456,542 1% 450,662 428,831 6%
(1) Our electric operations are reported as "held for sale". Accordingly, we
ceased to record depreciation expense effective January 1, 2001.
(2) Adjusted EBITDA is operating income plus depreciation and amortization.
Adjusted EBITDA is a measure commonly used to analyze companies on the
basis of operating performance. It is not a measure of financial
performance under generally accepted accounting principles and should not
be considered as an alternative to net income as a measure of performance
nor an alternative to cash flow as a measure of liquidity and may not be
comparable to similarly titled measures of other companies (see segment
footnote in the SEC Form 10-Q).
(3) Segment free cash flow is Adjusted EBITDA less cash capital expenditures.
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/ Robert J. Larson
-------------------------------------------
Robert J. Larson
Vice President and Chief Accounting Officer
Date: May 14, 2002