EX-99.1 2 pranalsched2ndqtr07.txt 2ND QTR ANALYST SCHEUDLES Exhibit 99.1 Citizens Communications 3 High Ridge Park Stamford, CT 06905 203.614.5600 Web site: www.czn.net Contact: Brigid Smith 203.614.5042 bsmith@czn.com Citizens Communications Reports 2007 Second-Quarter Results Stamford, Conn., August 1, 2007 -- Citizens Communications (NYSE:CZN) today reported second quarter 2007 revenues of $578.8 million, operating income of $171.3 million, and net income of $40.6 million. Net income of $101.7 million for the second quarter of 2006 included the effects of the $64.6 million in cash received upon the liquidation of the Rural Telephone Bank. Excluding that gain, net income for the second quarter of 2006 would have been $63.0 million. Second quarter 2007 revenue was $578.8 million, as compared to $506.9 million in the second quarter of 2006. Second quarter 2007 results include revenues of $83.0 million related to the operations of Commonwealth Telephone Enterprises, which was acquired on March 8, 2007. Revenues, excluding the acquired property, were down 2.2 percent as compared to the same period last year, primarily due to lower federal and state subsidies which are reflected in access revenue, and lower local services revenue, partially offset by improvement in data and internet services. Excluding the acquired property, the Company experienced 17.3 percent growth in data and internet services revenue in the second quarter of 2007, compared to the second quarter of 2006. Second quarter 2007 other operating expenses were $215.2 million, as compared to $179.5 million in the second quarter of 2006. Excluding the expense increase due to the acquisition, the Company's other operating expenses for the second quarter of 2007 decreased by approximately $5.3 million or 3.0 percent, as compared to the second quarter of 2006 primarily driven by a reduction in the number of employees and improved expense control in benefit costs. Depreciation and amortization expense for the second quarter of 2007 was $140.5 million, as compared to $119.6 million in the second quarter of 2006. Depreciation and amortization expense for the second quarter of 2007, excluding the impact of the acquisition, decreased $6.2 million or 5.2 percent as compared to the second quarter of 2006. The decrease is primarily due to a declining net asset base. The Company added approximately 15,300 high-speed internet customers during the quarter and had more than 479,300 high-speed internet customers at June 30, 2007. -MORE- Operating income for the second quarter of 2007 was $171.3 million and operating income margin was 29.6 percent. Excluding the acquired property, operating income for the second quarter of 2007 was $163.3 million and operating income margin was 32.9 percent compared to $169.5 million and 33.4 percent in the second quarter of 2006. Capital expenditures were $66.7 million for the second quarter of 2007 and $111.8 million for the first six months of 2007, including $12.9 million related to the acquired property since the date of acquisition. Free cash flow was $116.3 million for the second quarter of 2007 and $303.9 million for the first six months of 2007. The Company's dividend represents a payout of 56 percent of free cash flow for the first six months of 2007. During the second quarter, the Company repurchased 3,809,800 shares of its common stock for $58.7 million. In addition, during the second quarter, the Company redeemed $495.2 million principal amount of its 7.625% Senior Notes due 2008. "We delivered another quarter of strong financial results," said Maggie Wilderotter, Chairman and CEO of Citizens. "Continued customer product revenue growth along with disciplined expense control and realized synergies on our Commonwealth acquisition generated a 53.9 percent operating cash flow margin. Our penetration levels increased on all bundled products and high speed revenues continued to be over $40.00 per customer per month. We are also excited about our recently announced acquisition of Global Valley and remain confident in delivering on our results for the remainder of the year." 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 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. 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 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. --MORE -- 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 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 More information about Citizens can be found at www.czn.net. 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: our ability to successfully integrate the operations of Commonwealth Telephone Enterprises, Inc. and to realize the synergies from the Commonwealth acquisition; changes in the number of our revenue generating units; greater than anticipated competition from wireless or wireline carriers; the effects of ongoing changes in the regulation of the communications industry; our ability to successfully introduce new product offerings, including bundled service packages; our ability to sell enhanced services; our ability to comply with federal and state regulations; our ability to effectively manage our operations, costs and capital spending; our ability to successfully renegotiate expiring union contracts; overall changes in the telecommunications market and general and local economic and employment conditions. 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) (unaudited) For the quarter ended For the six months ended June 30, June 30, ---------------------------- % -------------------------- % (Amounts in thousands, except per share amounts) 2007 2006 Change 2007 2006 Change ------------------------------------ ------------------------------------ Income Statement Data Revenue $578,826 $506,912 14% $1,134,973 $1,013,773 12% Network access expenses 51,878 38,402 35% 102,671 78,620 31% Other operating expenses 215,188 179,500 20% 405,059 366,801 10% Depreciation and amortization 140,462 119,552 17% 262,643 241,556 9% Operating income 171,298 169,458 1% 364,600 326,796 12% Investment and other income (loss), net (5) (6,517) 65,363 -110% 3,500 64,012 -95% Interest expense 98,649 85,341 16% 192,613 170,734 13% Income tax expense 25,573 54,734 -53% 67,261 81,341 -17% Income from discontinued operations, net of tax - 6,956 NM - 13,452 NM Net income attributable to common shareholders 40,559 101,702 -60% 108,226 152,185 -29% Weighted average shares outstanding 340,469 322,337 6% 332,331 324,501 2% Basic net income per share attributable to $ 0.12 $ 0.32 -63% $ 0.33 $ 0.47 -30% common shareholders (2) Other Financial Data Capital expenditures $ 66,658 $ 54,519 22% $ 111,769 $ 98,284 14% Free cash flow (3) 116,295 159,973 -27% 303,850 323,269 -6% Dividends paid 85,379 80,140 7% 170,841 162,773 5% Dividend payout ratio (4) 73% 50% 46% 56% 50% 12%
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises, Inc. (CTE) for approximately $1.1 billion, and have included the historical results of CTE from the date of acquisition. (2) Calculated based on weighted average shares outstanding. (3) A reconciliation to the most comparable GAAP measure is presented at the end of these tables. (4) Represents dividends paid divided by free cash flow. (5) In April 2007, we redeemed $495.2 million principal amount of our 7.625% Senior Notes due 2008. The debt retirement generated a pre-tax loss on the early extinguishment of approximately $16.3 million. In April 2006, we received $64.6 million upon the liquidation of the Rural Telephone Bank. 1
Citizens Communications Company Financial and Operating Data (1) (unaudited) For the quarter ended For the six months ended June 30, June 30, --------------------------- % ---------------------------- % (Amounts in thousands, except operating data) 2007 2006 Change 2007 2006 Change --------------------------------------- -------------------------------------- TELECOMMUNICATIONS Select Income Statement Data Revenue Local services $ 232,622 $ 203,254 14% $ 438,664 $ 406,820 8% Data and internet services 131,984 103,459 28% 248,410 203,548 22% Access services 113,429 104,611 8% 252,454 215,848 17% Long distance services 47,053 38,692 22% 87,481 77,850 12% Directory services 28,664 28,547 0% 57,334 57,344 0% Other 25,074 28,349 -12% 50,630 52,363 -3% -------------- ------------- ------------ -------------- Total revenue 578,826 506,912 14% 1,134,973 1,013,773 12% -------------- ------------- ------------ -------------- Expenses Network access expenses 51,878 38,402 35% 102,671 78,620 31% Other operating expenses 215,188 179,500 20% 405,059 366,801 10% Depreciation and amortization 140,462 119,552 17% 262,643 241,556 9% -------------- ------------- ------------ -------------- Total expenses 407,528 337,454 21% 770,373 686,977 12% -------------- ------------- ------------ -------------- Operating Income $ 171,298 $ 169,458 1% $ 364,600 $ 326,796 12% ============== ============= ============ ============== Other Financial and Operating Data Access lines 2,503,718 2,188,901 14% 2,503,718 2,188,901 14% High-speed internet subscribers 479,317 358,851 34% 479,317 358,851 34% Wireline bundle subscribers 593,020 480,435 23% 593,020 480,435 23% Switched access minutes of use (in millions) 2,748 2,579 7% 5,276 5,233 1% Average monthly revenue per average access line (2) $ 76.53 $ 76.76 0% $ 81.82 $ 76.34 7%
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises, Inc. (CTE) for approximately $1.1 billion, and have included the historical results of CTE from the date of acquisition. (2) For the six months ended June 30, 2007, the calculation excludes CTE data and includes the $38.7 million favorable impact from the first quarter 2007 settlement of a switched access dispute. The amount is $78.75 without the $38.7 million favorable impact from the settlement. 2
Citizens Communications Company Condensed Consolidated Balance Sheet Data (1) (Amounts in thousands) (Unaudited) June 30, 2007 December 31, 2006 ---------------- ----------------- ASSETS ------ Current assets: Cash and cash equivalents $ 418,100 $ 1,041,106 Accounts receivable and other current assets 277,375 231,887 ---------------- ----------------- Total current assets 695,475 1,272,993 Property, plant and equipment, net 3,300,549 2,983,504 Other long-term assets 3,531,724 2,534,708 ---------------- ----------------- Total assets $ 7,527,748 $ 6,791,205 ================ ================= LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current liabilities: Long-term debt due within one year $ 32,774 $ 39,271 Accounts payable and other current liabilities 404,599 386,372 ---------------- ----------------- Total current liabilities 437,373 425,643 Deferred income taxes and other liabilities 1,162,023 846,775 Long-term debt 4,698,583 4,460,755 Shareholders' equity 1,229,769 1,058,032 ---------------- ----------------- Total liabilities and shareholders' equity $ 7,527,748 $ 6,791,205 ================ =================
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises, Inc. (CTE) for approximately $1.1 billion, and have included the historical results of CTE from the date of acquisition. 3
Citizens Communications Company Condensed Consolidated Cash Flow Data (1) (unaudited) (Amounts in thousands) For the six months ended June 30, ----------------------------------------------- 2007 2006 ---------------------- ------------------- Cash flows provided by (used in) operating activities: Net income $ 108,226 $ 152,185 Deduct: Income from discontinued operations - (13,452) Adjustments to reconcile income to net cash provided by operating activities: Depreciation and amortization expense 262,643 241,556 Stock based compensation 5,445 5,335 Other (26,944) (5,155) ------------------ ------------------ Net cash provided by continuing operating activities 349,370 380,469 Cash flows provided from (used by) investing activities: Capital expenditures (111,769) (98,284) Cash paid for Commonwealth acquisition, net (657,610) - Other assets (purchased) distributions received, net 3,851 62,244 ------------------ ------------------ Net cash used by investing activities (765,528) (36,040) Cash flows provided from (used by) financing activities: Long-term debt borrowings 950,000 - Financing costs paid (11,727) - Long-term debt payments (914,516) (198,126) Issuance of common stock 11,472 12,756 Dividends paid (170,841) (162,773) Common stock repurchased (70,730) (135,239) Other (506) 17 ------------------ ------------------ Net cash used by financing activities (206,848) (483,365) Cash flows of discontinued operations: Operating activities - 16,880 Investing activities - (5,545) Financing activities - - ------------------ ------------------ Net cash provided by discontinued operations - 11,335 Decrease in cash and cash equivalents (623,006) (127,601) Cash and cash equivalents at January 1, 1,041,106 268,917 ------------------ ------------------ Cash and cash equivalents at June 30, $ 418,100 $ 141,316 ================== ================== Cash paid during the period for: Interest $ 176,558 $ 169,841 Income taxes $ 47,426 $ 2,871
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises, Inc. (CTE) for approximately $1.1 billion, and have included the historical results of CTE from the date of acquisition. 4
Schedule A Reconciliation of Non-GAAP Financial Measures (1) For the quarter ended June 30, For the six months ended June 30, --------------------------------- -------------------------------------- (Amounts in thousands) 2007 2006 2007 2006 -------------- ----------------- -------------- ---------------------- Net Income to Free Cash Flow; ----------------------------- Net Cash Provided by Operating Activities ----------------------------------------- Net income $ 40,559 $ 101,702 $ 108,226 $ 152,185 Add back: Depreciation and amortization 140,462 119,552 262,643 241,556 Income tax expense 25,573 54,734 67,261 81,341 Stock based compensation 2,038 2,658 5,445 5,335 Subtract: Cash paid for income taxes 40,640 3,004 47,426 2,871 Investment and other income (loss), net of interest income (14,961) 61,150 (19,470) 55,993 Capital expenditures 66,658 54,519 111,769 98,284 ------------- ------------- ------------ ------------- Free cash flow 116,295 159,973 303,850 323,269 Add back: Deferred income taxes 4,962 53,990 28,576 78,153 Non-cash (gains)/losses, net 3,816 3,361 10,205 10,400 Investment and other income (loss), net of interest income (14,961) (278) (19,470) (5,435) Cash paid for income taxes 40,640 3,004 47,426 2,871 Capital expenditures 66,658 54,519 111,769 98,284 Subtract: Changes in current assets and liabilities 11,690 (5,635) 60,280 26,945 Income tax expense 25,573 54,734 67,261 81,341 Stock based compensation 2,038 2,658 5,445 5,335 Income from discontinued operations - 6,956 - 13,452 ------------- ------------- ------------ ------------- Net cash provided by operating activities $178,109 $ 215,856 $ 349,370 $ 380,469 ============= ============= ============ =============
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises, Inc. (CTE) for approximately $1.1 billion, and have included the historical results of CTE from the date of acquisition. 5
Schedule B Reconciliation of Non-GAAP Financial Measures (1) For the quarter ended June 30, For the six months ended June 30, ---------------------------------- ----------------------------------- (Amounts in thousands) 2007 2006 2007 2006 --------------- ----------------- ---------------- ---------------- Operating Cash Flow and ----------------------- Operating Cash Flow Margin -------------------------- Operating Income $ 171,298 $ 169,458 $ 364,600 $ 326,796 Add back: Depreciation and amortization 140,462 119,552 262,643 241,556 --------------- --------------- ---------------- ---------------- Operating cash flow $ 311,760 $ 289,010 $ 627,243 $ 568,352 =============== =============== ================ ================ Revenue $ 578,826 $ 506,912 $ 1,134,973 $ 1,013,773 =============== =============== ================ ================ Operating income margin (Operating income divided by revenue) 29.6% 33.4% 32.1% 32.2% =============== =============== ================ ================ Operating cash flow margin (Operating cash flow divided by revenue) 53.9% 57.0% 55.3% 56.1% =============== =============== ================ ================
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises, Inc. (CTE) for approximately $1.1 billion, and have included the historical results of CTE from the date of acquisition. 6
Schedule C Citizens Communications Company Consolidating Financial and Operating Data Support (1) (unaudited) For the quarter ended June 30, 2007 ----------------------------------------------- Citizens For the (excluding quarter ended % (Amounts in thousands, except operating data) As Reported CTE (1) CTE) (1) June 30, 2006 Change ----------------------------------------------- -------------- ---------- TELECOMMUNICATIONS Select Income Statement Data Revenue Local services $ 232,622 $ 36,391 $ 196,231 $ 203,254 -3% Data and internet services 131,984 10,623 121,361 103,459 17% Access services 113,429 22,673 90,756 104,611 -13% Long distance services 47,053 8,031 39,022 38,692 1% Directory services 28,664 275 28,389 28,547 -1% Other 25,074 4,984 20,090 28,349 -29% -------------- ------------ ------------ ------------ Total revenue 578,826 82,977 495,849 506,912 -2% -------------- ------------ ------------ ------------ Expenses Network access expenses 51,878 6,837 45,041 38,402 17% Other operating expenses 215,188 41,034 (3) 174,154 179,500 -3% Depreciation and amortization 140,462 27,070 (2) 113,392 119,552 -5% -------------- ------------ ------------ ------------ Total expenses 407,528 74,941 332,587 337,454 -1% -------------- ------------ ------------ ------------ Operating Income $ 171,298 $ 8,036 $ 163,262 $ 169,458 -4% ============== ============ ============ ============ Other Financial and Operating Data Capital expenditures $ 66,658 $ 8,592 $ 58,066 $ 54,519 7% Access lines 2,503,718 431,474 2,072,244 2,188,901 -5% High-speed internet subscribers 479,317 53,671 425,646 358,851 19% Wireline bundle subscribers 593,020 42,035 550,985 480,435 15% Switched access minutes of use (in millions) 2,748 372 2,376 2,579 -8% Average monthly revenue per average access line $ 76.53 $ 63.87 $ 79.16 $ 76.76 3%
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises, Inc. (CTE) for approximately $1.1 billion, and have included the historical results of CTE from the date of acquisition. (2) Includes amortization expense of $15.6 million regarding the customer base acquired in the Commonwealth acquisition. (3) Includes $9.7 million of common corporate costs allocated to the CTE operations. 7
Schedule D Citizens Communications Company Consolidating Financial and Operating Data Support (1) (unaudited) For the six months ended June 30, 2007 ---------------------------------------------- Citizens For the (excluding six months ended % (Amounts in thousands, except operating data) As Reported CTE (1) CTE) (1) June 30, 2006 Change ---------------------------------------------- ---------------- --------- TELECOMMUNICATIONS Select Income Statement Data Revenue Local services $ 438,664 $ 45,065 $ 393,599 $ 406,820 -3% Data and internet services 248,410 13,179 235,231 203,548 16% Access services 252,454 28,368 224,086 215,848 4% Long distance services 87,481 10,078 77,403 77,850 -1% Directory services 57,334 343 56,991 57,344 -1% Other 50,630 6,610 44,020 52,363 -16% ------------- ------------- ------------- ------------- Total revenue 1,134,973 103,643 1,031,330 1,013,773 2% ------------- ------------- ------------- ------------- Expenses Network access expenses 102,671 10,686 91,985 78,620 17% Other operating expenses 405,059 51,038 (4) 354,021 366,801 -3% Depreciation and amortization 262,643 33,968 (2) 228,675 241,556 -5% ------------- ------------- ------------- ------------- Total expenses 770,373 95,692 674,681 686,977 -2% ------------- ------------- ------------- ------------- Operating Income $ 364,600 $ 7,951 $ 356,649 $ 326,796 9% ============= ============= ============= ============= Other Financial and Operating Data Capital expenditures $ 111,769 $ 12,877 $ 98,892 $ 98,284 1% Access lines 2,503,718 431,474 2,072,244 2,188,901 -5% High-speed internet subscribers 479,317 53,671 425,646 358,851 19% Wireline bundle subscribers 593,020 42,035 550,985 480,435 15% Switched access minutes of use (in millions) 5,276 462 4,814 5,233 -8% Average monthly revenue per average access line (3) N/A N/A $ 81.82 $ 76.34 7%
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises, Inc. (CTE) for approximately $1.1 billion, and have included the historical results of CTE from the date of acquisition. (2) Includes amortization expense of $19.5 million for the 23 days of March and full second quarter regarding the customer base acquired in the Commonwealth acquisition. (3) For the six months ended June 30, 2007, the calculation includes the $38.7 million favorable impact from the first quarter 2007 settlement of a switched access dispute. The amount is $78.75 without the $38.7 million favorable impact from the settlement. (4) Includes $13.4 million of common corporate costs allocated to the CTE operations. 8