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, 2003
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 7. Financial Statements, Exhibits
(c) Exhibits
99.1 Press Release of Citizens Communications Company released
March 4, 2003 announcing earnings for the quarter and year ended
December 31, 2002.
99.2 Financial and operating data
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
Senior Vice President and Chief Accounting Officer
Date: March 4, 2003
Exhibit 99.1
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
2002 Fourth-Quarter Results
Stamford, Conn., Mar. 4, 2003 - Citizens Communications (NYSE:CZN) today
reported revenues of $520 million from its ILEC operations for the quarter ended
Dec. 31, 2002. The ILEC segment produced adjusted EBITDA of $278 million and had
capital expenditures of $83 million for the quarter.
The company produced free cash flow of $333 million for the full year 2002 and
achieved a net debt to annualized Adjusted EBITDA ratio for the fourth quarter
of 3.9x, surpassing the targeted year-end ratio. The company prepaid $344
million of debt during the quarter and repaid $1.06 billion (or 16 percent) of
its debt during the year, and ended the quarter with over $393 million in cash.
The company remains focused on and committed to the continuing improvement of
its balance sheet through the generation of free cash flow applied to further
debt reduction. In addition, the sale of the company's Arizona Electric and Gas
divisions for $230 million in cash and the sale of The Gas Company of Hawaii
division for $115 million in cash are expected to close during the second half
of 2003. The net proceeds from these sales will be used to further reduce debt.
For the fourth quarter 2002 consolidated results were revenues of $659 million;
operating income of $99 million; capital expenditures of $115 million; free cash
flow of $71 million; and the net loss was $24 million.
During the fourth quarter the company also reduced stockholders' equity by $112
million as a result of certain pension matters previously disclosed. After
giving effect to this reduction the company's "net worth" as calculated pursuant
to certain debt agreements was $1.83 billion at Dec. 31, 2002.
Telecommunications
Fourth quarter 2002 revenue from the company's ILEC operations was $520.4
million, up $9.7 million or 2 percent from $510.7 million in the fourth quarter
of 2001, primarily due to continued increases in penetration of data, enhanced
service and long-distance products, sales of special access services and
increased subsidies. For the full year, revenue from the company's ILEC
operations was $2.063 billion, up $468.9 million, or 29 percent.
ILEC operating income for the fourth quarter was $89.2 million, up $56.2
million, or 170 percent from the fourth quarter of 2001, and for the full year
was $413 million compared to $221 million in 2001.
Adjusted EBITDA for the fourth quarter of 2002 was $278 million, an increase of
$24 million or 10 percent compared to the prior year quarter. Adjusted EBITDA
margin for the fourth-quarter of 2002 increased to 53.5 percent from 49.7
percent in the fourth quarter of 2001, reflecting increases in high-margin
revenues, an ongoing focus on increased productivity and the efficiencies
achieved from consolidation of the company's activities. Adjusted EBITDA for the
full year 2002 was $1.097 billion, an increase of $294 million or 37 percent
from the prior year.
Capital expenditures for the ILEC were $83 million and operating cash flow
(Adjusted EBITDA minus capital expenditures) was $195 million for the quarter.
For the full year 2002 ILEC capital expenditures were $289 million and operating
cash flow was $808 million.
Fourth-quarter 2002 revenue from Electric Lightwave totaled $41.2 million,
Adjusted EBITDA was $9.8 million, capital expenditures were $3.8 million and
operating cash flow was $6 million. For the full year 2002, revenue totaled $175
million, Adjusted EBITDA was $17.1 million, capital expenditures were $12
million and operating cash flow was $5.1 million.
Public Service
The gas and electric segments accounted for $97 million of fourth-quarter 2002
consolidated revenue, $10.2 million of Adjusted EBITDA and $9.1 million of
capital expenditures. For the full year 2002, the gas and electric segment
accounted for $431.3 million of consolidated revenue, $76.1 million of Adjusted
EBITDA, $39.7 million of capital expenditures and $36.4 million of operating
cash flow.
Adjusted EBITDA is EBITDA (operating income plus depreciation and amortization)
plus restructuring and other expenses, loss on impairment and reserve for
telecommunications bankruptcies. Free cash flow is operating income plus
depreciation and amortization and the loss on impairment, minus cash capital
expenditures, cash interest expense and cash taxes. EBITDA is a measure commonly
used to analyze companies on the basis of operating performance. EBITDA is not a
measure of financial performance under generally accepted accounting principles
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. 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 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 because of, but not limited to,
changes in local and national economies, the state of the telecommunications
industry, 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 and the mix of products and
services offered in the company's markets. 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.
Exhibit 99.2
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 2002 2001 Change 2002 2001 Change
amounts) ----------------------------------- ------------------------------------
Income Statement Data
Continuing operations
Revenue $ 658,728 $ 665,849 -1% $ 2,669,332 $2,456,993 9%
Cost of services 119,101 122,271 -3% 476,920 599,378 -20%
Other operating expenses (1) 241,397 271,073 -11% 1,002,355 951,710 5%
Depreciation and amortization (2) 191,359 218,602 -12% 755,522 632,336 19%
Reserve for telecommunications bankruptcies (6,925) 21,200 -133% 10,880 21,200 -49%
Restructuring and other expenses (3) 15,274 6,325 141% 37,186 19,327 92%
Loss on impairment (4) - - - 1,074,058 - 100%
Operating income (loss) 98,522 26,378 274% (687,589) 233,042 -395%
Investment and other loss, net (19,828) (82,036) 76% (82,553) (65,541) -26%
Gain on sale of assets 7,897 - 100% 9,798 139,304 -93%
Interest expense 113,280 122,845 -8% 477,506 385,536 24%
Income tax expense (benefit) 9,814 (63,988) 115% (414,874) (14,805) -2702%
Income (loss) from discontinued operations,
net of tax - 6,200 -100% (1,478) 17,875 -108%
Gain on disposal of water segment, net of tax 12,043 - 100% 181,369 - 100%
Extraordinary expense-discontinuation of Statement of
Financial Accounting Standards No. 71, net of tax - - - - 43,631 -100%
Cumulative effect of change in accounting
principle (5) - - - 39,812 - -100%
Carrying cost of equity forward contracts - - - - 13,650 -100%
Net loss available to common shareholders (24,460) (108,315) 77% (682,897) (103,332) -561%
Other Financial Data
Adjusted EBITDA from continuing operations (6) $ 298,230 $ 272,505 9% $ 1,190,057 $ 905,905 31%
Total capital expenditures (7) 114,538 177,666 -36% 358,741 487,271 -26%
Free cash flow (7) (8) 70,945 (72,363) 198% 333,174 77,523 330%
Long-term debt (9) 4,957,361 5,534,906 -10% 4,957,361 5,534,906 -10%
Total debt (9) 5,016,272 6,018,812 -17% 5,016,272 6,018,812 -17%
Less: Cash and cash equivalents 393,177 215,869 82% 393,177 215,869 82%
Net debt 4,623,095 5,802,943 -20% 4,623,095 5,802,943 -20%
Net debt to annualized Adjusted EBITDA 3.9 5.3 -26% 3.9 6.4 -39%
Interest coverage 2.6 2.2 18% 2.5 2.3 9%
Shares of common stock outstanding 282,484 281,291 0% 282,484 281,291 0%
Weighted average shares outstanding 281,096 279,675 1% 280,686 273,721 3%
Net loss available to common shareholders (10) $ (0.09) $ (0.39) 77% $ (2.43) $ (0.38) -539%
(1) Includes $3,715,000 and $21,380,000 of acquisition assimilation expenses
for the quarter and year ended December 31, 2001, respectively.
(2) 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. Also includes $37,526,000 and
$91,219,000 of goodwill amortization for the quarter and year ended
December 31, 2001, respectively.
(3) Primarily severance costs.
(4) Shown as the pre-tax amount.
(5) Write-off of ELI's goodwill.
(6) Adjusted EBITDA is operating income plus depreciation and amortization, the
reserve for telecommunications bankruptcies, restructuring and other
expenses and loss on impairment. 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-K).
(7) Excludes $110,000,000 of previously leased facilities purchased by ELI in
April 2002.
(8) Free cash flow is operating income plus depreciation and amortization and
loss on impairment minus cash interest expense, cash income taxes and cash
capital expenditures.
(9) Excludes equity units. Total debt includes current portion of long term
debt.
(10) Calculated based on weighted average shares outstanding.
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) % %
TELECOMMUNICATIONS (1) 2002 2001 Change 2002 2001 Change
------------------------------------- -------------------------------------
Select Income Statement Data
Revenue
Access services $ 169,762 $ 170,902 -1% $ 673,456 $ 564,670 19%
Local services 219,217 215,452 2% 869,907 673,320 29%
Long distance and data services 78,207 73,130 7% 305,455 208,274 47%
Directory services 25,886 25,433 2% 104,383 72,375 44%
Other 27,339 25,801 6% 109,704 75,414 45%
ILEC revenue 520,411 510,718 2% 2,062,905 1,594,053 29%
Electric Lightwave 41,235 50,083 -18% 175,079 223,391 -22%
Total revenue 561,646 560,801 0% 2,237,984 1,817,444 23%
Expenses
Network access expense 60,688 64,856 -6% 235,462 194,094 21%
Other operating expenses (2) 212,923 236,322 -10% 888,560 807,739 10%
Depreciation and amortization (3) 191,351 218,151 -12% 755,158 625,293 21%
Reserve for telecommunications bankruptcies (6,925) 21,200 -133% 10,880 21,200 -49%
Restructuring and other expenses (4) 15,274 6,325 141% 37,186 19,327 92%
Loss on impairment (5) - - - 656,658 - 100%
Total expenses 473,311 546,854 -13% 2,583,904 1,667,653 55%
Adjusted EBITDA and Capital Expenditure Data
ILEC Adjusted EBITDA (6) $ 278,247 $ 253,915 10% $ 1,096,864 $ 802,577 37%
ILEC Adjusted EBITDA margin 53.5% 49.7% 8% 53.2% 50.3% 6%
ILEC capital expenditures $ 83,343 $ 149,345 -44% $ 288,823 $ 391,377 -26%
ELI Adjusted EBITDA (6) 9,788 5,708 71% 17,098 13,034 31%
ELI capital expenditures (7) 3,800 8,381 -55% 12,003 28,233 -57%
Operating Income (Loss)
ILEC $ 89,174 $ 32,999 170% $ 413,241 $ 220,956 87%
ELI (839) (19,052) 96% (759,161) (71,165) -967%
Operating Data
ILEC access lines 2,444,400 2,481,409 -1% 2,444,400 2,481,409 -1%
ILEC switched access minutes of use
(in millions) 3,069 3,107 -1% 12,252 9,937 23%
ILEC average monthly revenue per average line $ 70.75 $ 68.48 3% $ 69.80 $ 68.76 2%
(1) Includes our Incumbent Local Exchange Carrier (ILEC) and Electric Lightwave, Inc. (ELI) businesses.
(2) See footnote (1) on first page.
(3) See footnote (2) on first page.
(4) See footnote (3) on first page.
(5) See footnote (4) on first page.
(6) See footnote (6) on first page.
(7) See footnote (7) on first page.
Citizens Communications Company
Financial and Operating Data
(unaudited)
For the quarter ended For the year ended
December 31, December 31,
----------------------------- -----------------------------
(Dollars in thousands) % %
GAS AND ELECTRIC SECTORS (1) 2002 2001 Change 2002 2001 Change
---------------------------------------- ----------------------------------------
Select Income Statement Data
Revenue $ 97,083 $ 105,048 -8% $ 431,348 $ 639,549 -33%
Gas, electric energy and fuel oil purchased 58,413 57,415 2% 241,458 405,284 -40%
Other operating expenses 28,473 34,751 -18% 113,795 143,971 -21%
Depreciation and amortization (2) 8 451 -98% 364 7,043 -95%
Loss on impairment (3) - - - 417,400 - 100%
Operating income (loss) 10,189 12,431 -18% (341,669) 83,251 -510%
Other Financial Data
Adjusted EBITDA (4) $ 10,197 $ 12,882 -21% $ 76,095 $ 90,294 -16%
Capital expenditures 9,140 19,123 -52% 39,660 66,844 -41%
(1) Our Louisiana and Colorado gas operations were disposed of by sale on July
2, 2001 and November 30, 2001, respectively. Our Kauai Electric operations
were disposed of by sale on November 1, 2002. The sale of these operations
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.
(3) See footnote (4) on first page.
(4) Adjusted EBITDA is operating income plus depreciation and amortization and
loss on impairment (see footnote (6) on first page).