Citizens Communications Reports 2002 Fourth-Quarter Results.Business Editors STAMFORD Stamford, town, England Stamford, town (1991 pop. 18,127), in the Parts of Kesteven, Lincolnshire, E central England, on the Welland River. It is a market town. Products include diesel engines, electrical equipment, bricks, and tiles. , Conn.--(BUSINESS WIRE)--March 4, 2003 Citizens Communications Citizens Communications is the parent company of Frontier Telephone, providing telephone and internet access in 24 states. The company headquarters are located at 3 High Ridge Park in Stamford, Connecticut. (NYSE NYSE See: New York Stock Exchange :CZN) today reported revenues of $520 million from its ILEC (Incumbent Local Exchange Carrier) A traditional local telephone company such as one of the Regional Bell companies (RBOCs). Contrast with CLEC. See ELEC and TELRIC. operations for the quarter ended Dec. 31, 2002. The ILEC segment produced adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become 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 annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. Adjusted EBITDA ratio for the fourth quarter of 3.9x, surpassing the targeted year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. ratio. The company prepaid pre·pay tr.v. pre·paid, pre·pay·ing, pre·pays To pay or pay for beforehand. pre·pay  ment n. $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 Arizona (âr'əzō`nə), state in the southwestern United States. It is bordered by Utah (N), New Mexico (E), Mexico (S), and, across the Colorado R., Nevada and California (W). Electric and Gas divisions for $230 million in cash and the sale of The Gas Company of Hawaii Hawaii, island, United States Hawaii, island (1990 pop. 120,217), 4,037 sq mi (10,456 sq km), largest and southernmost island of the state of Hawaii and coextensive with Hawaii co.; known as the Big Island. division for $115 million in cash are expected to close during the second half of 2003. The net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). from these sales will be used to further reduce debt. For the fourth quarter 2002 consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: results were revenues of $659 million; operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. 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 Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. by $112 million as a result of certain pension matters previously disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). . 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 Communicating information, including data, text, pictures, voice and video over long distance. See communications. 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 The successful unauthorized breach of a security perimeter. See penetration test. of data, enhanced service Enhanced service is service offered over commercial carrier transmission facilities used in interstate communications, that employs computer processing applications that act on the format, content, code, protocol, or similar aspects of the subscriber's transmitted information; and long-distance long-dis·tance adj. 1. Covering a long distance: a long-distance runner; operating under long-distance supervision. 2. 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 Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. (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 Light in the infrared, visible and ultraviolet ranges, which falls between x-rays and microwaves. Wavelengths are between 10 nanometers and one millimeter. 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 restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). and other expenses, loss on impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. 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 an·a·lyze v. 1. To examine methodically by separating into parts and studying their interrelations. 2. To separate a chemical substance into its constituent elements to determine their nature or proportions. 3. companies on the basis of operating performance. EBITDA is not a measure of financial performance under generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting 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 conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. 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 forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. 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 COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. in the company's markets, success in overall strategy, changes in legal or regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. 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 and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. 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 CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or .
Citizens Communications Company
Consolidated Financial Data
(unaudited)
For the quarter
ended
December 31,
-----------------------
(Amounts in thousands - except %
per-share amounts) 2002 2001 Change
------------------------------
Income Statement Data
Continuing operations
Revenue $ 658,728 $ 665,849 -1%
Cost of services 119,101 122,271 -3%
Other operating expenses (1) 241,397 271,073 -11%
Depreciation and amortization (2) 191,359 218,602 -12%
Reserve for telecommunications
bankruptcies (6,925) 21,200 -133%
Restructuring and other expenses (3) 15,274 6,325 141%
Loss on impairment (4) - - -
Operating income (loss) 98,522 26,378 274%
Investment and other loss, net (19,828) (82,036) 76%
Gain on sale of assets 7,897 - 100%
Interest expense 113,280 122,845 -8%
Income tax expense (benefit) 9,814 (63,988) 115%
Income (loss) from discontinued
operations, net of tax - 6,200 -100%
Gain on disposal of water segment, net
of tax 12,043 - 100%
Extraordinary expense-discontinuation of
Statement of Financial Accounting
Standards No. 71, net of tax - - -
Cumulative effect of change in
accounting principle (5) - - -
Carrying cost of equity forward
contracts - - -
Net loss available to common
shareholders (24,460) (108,315) 77%
Other Financial Data
Adjusted EBITDA from continuing
operations (6) $ 298,230 $ 272,505 9%
Total capital expenditures (7) 114,538 177,666 -36%
Free cash flow (7) (8) 70,945 (72,363) 198%
Long-term debt (9) 4,957,361 5,534,906 -10%
Total debt (9) 5,016,272 6,018,812 -17%
Less: Cash and cash equivalents 393,177 215,869 82%
Net debt 4,623,095 5,802,943 -20%
Net debt to annualized Adjusted EBITDA 3.9 5.3 -26%
Interest coverage 2.6 2.2 18%
Shares of common stock outstanding 282,484 281,291 0%
Weighted average shares outstanding 281,096 279,675 1%
Net loss available to common
shareholders (10) $ (0.09) $ (0.39) 77%
For the year
ended
December 31,
-----------------------
(Amounts in thousands - except %
per-share amounts) 2002 2001 Change
------------------------------
Income Statement Data
Continuing operations
Revenue $2,669,332 $2,456,993 9%
Cost of services 476,920 599,378 -20%
Other operating expenses (1) 1,002,355 951,710 5%
Depreciation and amortization (2) 755,522 632,336 19%
Reserve for telecommunications
bankruptcies 10,880 21,200 -49%
Restructuring and other expenses (3) 37,186 19,327 92%
Loss on impairment (4) 1,074,058 - 100%
Operating income (loss) (687,589) 233,042 -395%
Investment and other loss, net (82,553) (65,541) -26%
Gain on sale of assets 9,798 139,304 -93%
Interest expense 477,506 385,536 24%
Income tax expense (benefit) (414,874) (14,805) -2702%
Income (loss) from discontinued
operations, net of tax (1,478) 17,875 -108%
Gain on disposal of water segment, net
of tax 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 (682,897) (103,332) -561%
Other Financial Data
Adjusted EBITDA from continuing
operations (6) $1,190,057 $ 905,905 31%
Total capital expenditures (7) 358,741 487,271 -26%
Free cash flow (7)(8) 333,174 77,523 330%
Long-term debt (9) 4,957,361 5,534,906 -10%
Total debt (9) 5,016,272 6,018,812 -17%
Less: Cash and cash equivalents 393,177 215,869 82%
Net debt 4,623,095 5,802,943 -20%
Net debt to annualized Adjusted EBITDA 3.9 6.4 -39%
Interest coverage 2.5 2.3 6%
Shares of common stock outstanding 282,484 281,291 0%
Weighted average shares outstanding 280,686 273,721 3%
Net loss available to common
shareholders (10) $ (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
December 31,
-----------------------
(Dollars in thousands, except operating
data) %
TELECOMMUNICATIONS (1) 2002 2001 Change
------------------------------
Select Income Statement Data
Revenue
Access services $ 169,762 $ 170,902 -1%
Local services 219,217 215,452 2%
Long distance and data services 78,207 73,130 7%
Directory services 25,886 25,433 2%
Other 27,339 25,801 6%
ILEC revenue 520,411 510,718 2%
Electric Lightwave 41,235 50,083 -18%
Total revenue 561,646 560,801 0%
Expenses
Network access expense 60,688 64,856 -6%
Other operating expenses (2) 212,923 236,322 -10%
Depreciation and amortization (3) 191,351 218,151 -12%
Reserve for telecommunications
bankruptcies (6,925) 21,200 -133%
Restructuring and other expenses (4) 15,274 6,325 141%
Loss on impairment (5) - - -
Total expenses 473,311 546,854 -13%
Adjusted EBITDA and Capital Expenditure
Data
ILEC Adjusted EBITDA (6) $ 278,247 $ 253,915 10%
ILEC Adjusted EBITDA margin 53.5% 49.7% 8%
ILEC capital expenditures $ 83,343 $ 149,345 -44%
ELI Adjusted EBITDA (6) 9,788 5,708 71%
ELI capital expenditures (7) 3,800 8,381 -55%
Operating Income (Loss)
ILEC $ 89,174 $ 32,999 170%
ELI (839) (19,052) 96%
Operating Data
ILEC access lines 2,444,400 2,481,409 -1%
ILEC switched access minutes of use
(in millions) 3,069 3,107 -1%
ILEC average monthly revenue per
average line $ 70.75 $ 68.48 3%
For the year
ended
December 31,
-----------------------
(Dollars in thousands, except operating
data) %
TELECOMMUNICATIONS (1) 2002 2001 Change
------------------------------
Select Income Statement Data
Revenue
Access services $ 673,456 $ 564,670 19%
Local services 869,907 673,320 29%
Long distance and data services 305,455 208,274 47%
Directory services 104,383 72,375 44%
Other 109,704 75,414 45%
ILEC revenue 2,062,905 1,594,053 29%
Electric Lightwave 175,079 223,391 -22%
Total revenue 2,237,984 1,817,444 23%
Expenses
Network access expense 235,462 194,094 21%
Other operating expenses (2) 888,560 807,739 10%
Depreciation and amortization (3) 755,158 625,293 21%
Reserve for telecommunications
bankruptcies 10,880 21,200 -49%
Restructuring and other expenses (4) 37,186 19,327 92%
Loss on impairment (5) 656,658 - 100%
Total expenses 2,583,904 1,667,653 55%
Adjusted EBITDA and Capital Expenditure
Data
ILEC Adjusted EBITDA (6) $1,096,864 $ 802,577 37%
ILEC Adjusted EBITDA margin 53.2% 50.3% 6%
ILEC capital expenditures $ 288,823 $ 391,377 -26%
ELI Adjusted EBITDA (6) 17,098 13,034 31%
ELI capital expenditures (7) 12,003 28,233 -57%
Operating Income (Loss)
ILEC $ 413,241 $ 220,956 87%
ELI (759,161) (71,165) -967%
Operating Data
ILEC access lines 2,444,400 2,481,409 -1%
ILEC switched access minutes of use
(in millions) 12,252 9,937 23%
ILEC average monthly revenue per
average line $ 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
December 31,
-----------------------
(Dollars in thousands) %
GAS AND ELECTRIC SECTORS (1) 2002 2001 Change
------------------------------
Select Income Statement Data
Revenue $ 97,083 $ 105,048 -8%
Gas, electric energy and fuel oil
purchased 58,413 57,415 2%
Other operating expenses 28,473 34,751 -18%
Depreciation and amortization (2) 8 451 -98%
Loss on impairment (3) - - -
Operating income (loss) 10,189 12,431 -18%
Other Financial Data
Adjusted EBITDA (4) $ 10,197 $ 12,882 -21%
Capital expenditures 9,140 19,123 -52%
For the year
ended
December 31,
-----------------------
(Dollars in thousands) %
GAS AND ELECTRIC SECTORS (1) 2002 2001 Change
------------------------------
Select Income Statement Data
Revenue $ 431,348 $ 639,549 -33%
Gas, electric energy and fuel oil
purchased 241,458 405,284 -40%
Other operating expenses 113,795 143,971 -21%
Depreciation and amortization (2) 364 7,043 -95%
Loss on impairment (3) 417,400 - 100%
Operating income (loss) (341,669) 83,251 -510%
Other Financial Data
Adjusted EBITDA (4) $ 76,095 $ 90,294 -16%
Capital expenditures 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).
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