Citizens Communications Reports 2003 Second-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)--Aug. 7, 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 second-quarter 2003 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: revenues of $644 million, consolidated 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 $135.2 million, and consolidated net income of $34.1 million, or 12 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. . Consolidated net income for the quarter includes a $25 million non-cash gain from the extinguishment The destruction or cancellation of a right, a power, a contract, or an estate. Extinguishment is sometimes confused with merger, though there is a clear distinction between them. of a capital lease obligation at 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. , a $4.4 million gain on the sale of a wireless partnership investment, a $2.3 million gain on the sale of access lines in North Dakota North Dakota, state in the N central United States. It is bordered by Minnesota, across the Red River of the North (E), South Dakota (S), Montana (W), and the Canadian provinces of Saskatchewan and Manitoba (N). , a $10.1 million charge related to 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, $4.5 million of non-cash expense Noun 1. non-cash expense - an expense (such as depreciation) that is not paid for in cash disbursal, disbursement, expense - amounts paid for goods and services that may be currently tax deductible (as opposed to capital expenditures) for restricted stock-related compensation, a $4.4 million charge related to early debt retirement and a $2.3 million charge related to the Touch America America [for Amerigo Vespucci], the lands of the Western Hemisphere—North America, Central (or Middle) America, and South America. The world map published in 1507 by Martin Waldseemüller is the first known cartographic use of the name. bankruptcy bankruptcy, in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most . Excluding these items, consolidated net income was $27.9 million, or 10 cents per share. The company produced free cash flow of $113.3 million for the second-quarter 2003 and achieved a ratio of 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. cash generated by operations of 3.5x and a ratio of net debt to annualized operating income of 7.9x. The company reached its 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. target leverage ratio Target Leverage Ratio The ratio of the market value of debt to the total market value of the firm that management seeks to maintain. of 3.5x two quarters early. The company retired $231.5 million of debt during the quarter and ended the quarter with $385 million in cash. The company has retired $355 million of debt during 2003. 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). Gas and Electric divisions for $220 million in cash and 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 and assumed liabilities remain on track for closings during the third quarter of 2003. After completion of these sales Citizens will have generated $1.9 billion of proceeds from its utility divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). program, which exceeds the company's original estimate of $1.8 billion of total proceeds. 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. The sale of the company's last public service business, the Vermont Vermont (vərmŏnt`) [Fr.,=green mountain], New England state of the NE United States. It is bordered by New Hampshire, across the Connecticut R. Electric division, for $25 million in cash is expected to close in the first half of 2004. Telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. Second-quarter 2003 revenue from the company's 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 was $510.2 million, down $4.5 million or 1 percent from $514.7 million in the second-quarter of 2002. The decrease is due to a $2.8 million decrease resulting from the sale of access lines in North Dakota and a decline in network access revenue, in part because of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $3.0 million less in subsidy subsidy, financial assistance granted by a government or philanthropic foundation to a person or association for the purpose of promoting an enterprise considered beneficial to the public welfare. revenue resulting from regulatory agency regulatory agency Independent government commission charged by the legislature with setting and enforcing standards for specific industries in the private sector. The concept was invented by the U.S. true-ups relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc prior years. These decreases were partially offset by continued increases in 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 data revenues. The company's primary access line count, which does not take into account DSL DSL in full Digital Subscriber Line Broadband digital communications connection that operates over standard copper telephone wires. It requires a DSL modem, which splits transmissions into two frequency bands: the lower frequencies for voice (ordinary subscriptions, decreased 5,600 lines during the quarter, excluding the sale of 10,800 access lines in North Dakota. The company added 12,300 DSL customers during the quarter. Taking into account DSL subscriptions, total subscriptions increased 6,700 for the quarter. ILEC operating income for the second-quarter of 2003 was $121.8 million, up $21.2 million, or 21 percent from the second quarter of 2002. Operating income margin was 23.9 percent compared to 19.5 percent in the second quarter of 2002. ILEC cash generated from operations for the second quarter of 2003 was $280.5 million, an increase of $6.2 million or 2 percent compared to the prior year quarter. ILEC cash generated from operations margin for the second quarter of 2003 increased to 55 percent from 53.3 percent in the second quarter of 2002, reflecting increases in high-margin revenues, an ongoing focus on increased productivity and the efficiencies achieved from consolidation of the company's activities. Capital expenditures for the ILEC were $56.4 million for the second-quarter 2003. Second-quarter 2003 revenue from Electric Lightwave totaled $43.7 million, operating income was $2.4 million, cash generated from operations was $10.7 million and capital expenditures were $2.3 million. Public Service The gas and electric segments accounted for $90.1 million of second-quarter 2003 consolidated revenue, $11 million of operating income, $11.2 million of cash generated from operations, and $9.1 million of capital expenditures. The company uses certain non-GAAP financial measures in evaluating its performance. These include cash generated from operations, cash generated from operations margin, net income excluding certain items, free cash flow and the ratio of net debt to annualized cash generated from operations. A reconciliation of the differences between these non-GAAP financial measures and the most comparable financial measures calculated and presented in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). is included in the tables that follow. The non-GAAP financial measures referred to in this press release are by definition not measures 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 and are not alternatives to operating income or net income reflected in the statement of operations See Income statement. or to cash flow as reflected in the statement of cash flows and are not necessarily indicative indicative: see mood. 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. Cash generated by operations is operating income plus (i) depreciation and amortization, (ii) reserve for certain telecom bankruptcies (Global Crossing, WorldCom The former name of MCI. Based in Jackson, MS, WorldCom, Inc. was a major, international telecommunications carrier. It was founded in 1983 by Bernard Ebbers as Long Distance Discount Service (LDDS), a reseller of AT&T WATS lines to small businesses. and Touch America), (iii) restructuring and other expenses (primarily the write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. of software costs and severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when costs and expenses), and (iv) restricted stock-related compensation expense. Cash generated by operations margin is cash generated by operations divided by revenue. Net income excluding certain items is net income without taking into account the items described in the first paragraph. Free cash flow is operating income plus depreciation and amortization and restricted stock-related compensation minus capital expenditures, interest expense and cash taxes. Net debt to annualized cash generated by operations is the ratio of (i) total debt (excluding equity units and convertible preferred) net of cash and cash equivalents to (ii) cash generated by operations for the period indicated multiplied mul·ti·ply 1 v. mul·ti·plied, mul·ti·ply·ing, mul·ti·plies v.tr. 1. To increase the amount, number, or degree of. 2. Mathematics To perform multiplication on. by four (for a quarter) or by two (for a six-month period). The company believes that presentation of these non-GAAP financial measures is useful to investors because it (i) reflects management's view of core operations and cash flow generation upon which management bases financial, operational, compensation and planning decisions, (ii) presents measurements that investors and rating agencies have indicated to management are important in assessing the company, and (iii) is indicative of the company's actual performance compared to the covenant covenant (kŭv`ənənt), agreement entered into voluntarily by two or more parties to do or refrain from doing certain acts. In the Bible and in theology the covenant is the agreement or engagement of God with man as revealed in the limiting the ratio of net debt to cash generated by operations contained in certain of its debt agreements. 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. 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 A shortcoming is a character flaw. Shortcomings may also be:
See:Residual value cash flow available for discretionary expenditures, since items such as debt repayments are not deducted de·duct v. de·duct·ed, de·duct·ing, de·ducts v.tr. 1. To take away (a quantity) from another; subtract. 2. To derive by deduction; deduce. v.intr. from such measures. Management compensates for the shortcomings of these measures by utilizing them 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 their comparable GAAP financial measures. In addition, annualized cash generated by operations and annualized operating income present quarterly or six-month information for purposes of ratio analysis as annualized information by multiplying mul·ti·ply 1 v. mul·ti·plied, mul·ti·ply·ing, mul·ti·plies v.tr. 1. To increase the amount, number, or degree of. 2. Mathematics To perform multiplication on. the quarterly information by four and the six- month information by two, without representing in any way a forecast, projection projection, in psychology: see defense mechanism. See rear-projection TV, front-projection TV and LCD panel. (theory) projection - In domain theory, a function, f, which is (a) idempotent, i.e. or estimate of cash generated by operations or operating income for future periods. 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 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. 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
June 30,
------------------------
(Amounts in thousands - except %
per-share amounts) 2003 2002 Change
--------------------------------
Income Statement Data
Continuing operations
Revenue $ 643,954 $ 662,439 -3%
Cost of services 113,537 113,786 0%
Other operating expenses 227,985 251,175 -9%
Restricted stock based compensation 4,508 251 1696%
Depreciation and amortization (1) 150,359 186,378 -19%
Reserve for telecommunications
bankruptcies 2,260 10,001 -77%
Restructuring and other expenses 10,113 18,280 -45%
Operating income 135,192 82,568 64%
Investment and other income (loss),
net 24,566 (29,188) 184%
Gain on sales of assets, net 6,671 - 100%
Interest expense (includes dividends
on preferred securities) 107,988 121,499 -11%
Income tax expense (benefit) 24,384 (26,560) 192%
Loss from discontinued operations, net
of tax - - -
Gain on disposal of water segment, net
of tax - - -
Cumulative effect of change in
accounting principle (2) - - -
Net income (loss) attributable to
common shareholders 34,057 (41,559) 182%
Weighted average shares outstanding 282,180 280,610 1%
Net income (loss) attributable to
common shareholders $ 0.12 $ (0.15) 180%
Other Financial Data (3)
Cash generated by operations $ 302,432 $ 297,478 2%
Total capital expenditures (4) 67,850 94,119 -28%
Free cash flow 113,295 44,040 157%
Total debt (5) 4,662,168 5,403,338 -14%
Less: Cash and cash equivalents 385,038 421,069 -9%
Net debt 4,277,130 4,982,269 -14%
Net debt to annualized cash generated
by operations 3.5 4.2 -17%
For the six months ended
June 30,
------------------------
(Amounts in thousands - except %
per-share amounts) 2003 2002 Change
--------------------------------
Income Statement Data
Continuing operations
Revenue $1,295,816 $1,341,773 -3%
Cost of services 226,756 242,024 -6%
Other operating expenses 462,428 509,931 -9%
Restricted stock based compensation 5,886 2,349 151%
Depreciation and amortization (1) 288,907 364,552 -21%
Reserve for telecommunications
bankruptcies 2,260 17,805 -87%
Restructuring and other expenses 10,092 22,185 -55%
Operating income 299,487 182,927 64%
Investment and other income (loss),
net 74,388 (78,139) 195%
Gain on sales of assets, net 5,021 - 100%
Interest expense (includes dividends
on preferred securities) 218,817 244,659 -11%
Income tax expense (benefit) 64,360 (53,502) 220%
Loss from discontinued operations, net
of tax - (1,478) -100%
Gain on disposal of water segment, net
of tax - 169,326 -100%
Cumulative effect of change in
accounting principle (2) 65,769 (39,812) 265%
Net income (loss) attributable to
common shareholders 161,488 41,667 288%
Weighted average shares outstanding 281,934 280,432 1%
Net income (loss) attributable to
common shareholders $ 0.57 $ 0.15 280%
Other Financial Data (3)
Cash generated by operations $ 606,632 $ 589,818 3%
Total capital expenditures (4) 115,602 162,558 -29%
Free cash flow 258,625 131,716 96%
Total debt (5) 4,662,168 5,403,338 -14%
Less: Cash and cash equivalents 385,038 421,069 -9%
Net debt 4,277,130 4,982,269 -14%
Net debt to annualized cash generated
by operations 3.5 4.2 -17%
(1) 2002 includes $900,000 and $12,800,000, respectively, of
accelerated depreciation related to the closing of our Plano,
Texas facility.
(2) 2003 represents the effect of adoption of SFAS No. 143. 2002
represents the write-off of ELI's goodwill. Both are net of tax.
(3) A reconciliation of these non-GAAP measures to the most comparable
GAAP measure is presented at the end of these tables.
(4) 2002 excludes $110,000,000 of previously leased facilities
purchased by ELI in April 2002.
(5) Excludes equity units and convertible preferred stock. Total debt
includes current portion of long term debt.
Citizens Communications Company
Financial and Operating Data
(unaudited)
For the quarter ended
June 30,
------------------------
(Dollars in thousands, except %
operating data) 2003 2002 Change
--------------------------------
TELECOMMUNICATIONS
Select Income Statement Data
Revenue
Network access services $ 160,142 $ 171,163 -6%
Local network services 220,710 217,638 1%
Long distance and data services 76,487 71,029 8%
Directory services 26,736 25,810 4%
Other 26,078 29,046 -10%
ILEC revenue 510,153 514,686 -1%
Electric Lightwave 43,719 45,287 -3%
Total revenue 553,872 559,973 -1%
Expenses
Network access expense 58,168 58,598 -1%
Other operating expenses 204,515 224,821 -9%
Restricted stock based compensation 4,293 310 1285%
Depreciation and amortization (1) 150,359 186,332 -19%
Reserve for telecommunications
bankruptcies 2,260 10,001 -77%
Restructuring and other expenses 10,113 18,280 -45%
Total expenses 429,708 498,342 -14%
Operating Income (Loss)
ILEC $ 121,814 $ 100,607 21%
ELI 2,350 (38,976) 106%
Other Financial and Operating Data (2)
ILEC cash generated by operations $ 280,498 $ 274,316 2%
ILEC cash generated by operations
margin 55.0% 53.3% 3%
ILEC capital expenditures $ 56,415 $ 81,364 -31%
ELI cash generated by operations 10,691 2,238 378%
ELI capital expenditures (3) 2,254 3,067 -27%
ILEC access lines 2,418,819 2,471,496 -2%
ILEC switched access minutes of use
(in millions) 2,995 3,034 -1%
ILEC average monthly revenue per
average line $ 70.07 $ 69.32 1%
For the six months ended
June 30,
------------------------
(Dollars in thousands, except %
operating data) 2003 2002 Change
--------------------------------
TELECOMMUNICATIONS
Select Income Statement Data
Revenue
Network access services $ 325,139 $ 336,996 -4%
Local network services 441,805 434,438 2%
Long distance and data services 151,265 141,315 7%
Directory services 53,779 52,054 3%
Other 51,774 57,914 -11%
ILEC revenue 1,023,762 1,022,717 0%
Electric Lightwave 84,812 92,534 -8%
Total revenue 1,108,574 1,115,251 -1%
Expenses
Network access expense 114,683 116,556 -2%
Other operating expenses 415,369 455,105 -9%
Restricted stock based compensation 5,649 2,346 141%
Depreciation and amortization (1) 288,907 364,422 -21%
Reserve for telecommunications
bankruptcies 2,260 17,805 -87%
Restructuring and other expenses 10,092 22,185 -55%
Total expenses 836,960 978,419 -14%
Operating Income (Loss)
ILEC $ 268,729 $ 192,828 39%
ELI 2,885 (55,996) 105%
Other Financial and Operating Data (2)
ILEC cash generated by operations $ 560,873 $ 540,331 4%
ILEC cash generated by operations
margin 54.8% 52.8% 4%
ILEC capital expenditures $ 94,292 $ 137,404 -31%
ELI cash generated by operations 17,649 3,259 442%
ELI capital expenditures (3) 3,401 5,656 -40%
ILEC access lines 2,418,819 2,471,496 -2%
ILEC switched access minutes of use
(in millions) 6,040 6,048 0%
ILEC average monthly revenue per
average line $ 70.16 $ 68.84 2%
(1) See footnote (1) on first page.
(2) See footnote (3) on first page.
(3) See footnote (4) on first page.
Citizens Communications Company
Financial and Operating Data
(unaudited)
For the quarter ended
June 30,
------------------------
%
(Dollars in thousands) 2003 2002 Change
--------------------------------
GAS AND ELECTRIC SECTORS (1)
Select Income Statement Data
Revenue $ 90,082 $ 102,466 -12%
Gas, electric energy and fuel oil
purchased 55,369 55,188 0%
Other operating expenses 23,470 26,354 -11%
Restricted stock based compensation 215 (59) 464%
Depreciation and amortization (2) - 46 -100%
Operating income 11,028 20,937 -47%
Other Financial Data (3)
Cash generated by operations $ 11,243 $ 20,924 -46%
Capital expenditures 9,123 9,440 -3%
For the six months ended
June 30,
------------------------
%
(Dollars in thousands) 2003 2002 Change
--------------------------------
GAS AND ELECTRIC SECTORS (1)
Select Income Statement Data
Revenue $ 187,242 $ 226,522 -17%
Gas, electric energy and fuel oil
purchased 112,073 125,468 -11%
Other operating expenses 47,059 54,826 -14%
Restricted stock based compensation 237 3 7800%
Depreciation and amortization (2) - 130 -100%
Operating income 27,873 46,095 -40%
Other Financial Data (3)
Cash generated by operations $ 28,110 $ 46,228 -39%
Capital expenditures 17,437 19,023 -8%
(1) Our Kauai Electric operations were sold on November 1, 2002, which
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 (3) on first page.
Citizens Communications Company
Condensed Consolidated Balance Sheet Data
(Dollars in thousands) June 30, December 31,
2003 2002
(unaudited)
------------ ------------
ASSETS
------
Current assets:
Cash and cash equivalents $ 385,038 $ 393,177
Accounts receivable and other current
assets 317,862 360,043
Assets held for sale 471,331 447,764
------------ ------------
Total current assets 1,174,231 1,200,984
Property, plant and equipment, net 3,620,734 3,690,056
Other long-term assets 3,167,307 3,255,702
------------ ------------
Total assets $ 7,962,272 $ 8,146,742
============ ============
LIABILITIES AND EQUITY
----------------------
Current liabilities:
Long-term debt due within one year $ 105,776 $ 58,911
Accounts payable and other current
liabilities 503,489 565,986
Liabilities related to assets held for
sale 113,186 145,969
------------ ------------
Total current liabilities 722,451 770,866
Deferred income taxes and other liabilities 666,228 585,126
Equity units 460,000 460,000
Long-term debt 4,556,392 4,957,361
Mandatorily Redeemable Convertible
Preferred Securities 201,250 201,250
Shareholders' equity 1,355,951 1,172,139
------------ ------------
Total liabilities and equity $ 7,962,272 $ 8,146,742
============ ============
Schedule A
Reconciliation of Non-GAAP Financial Measures
Net Income (Loss) to Net Income (Loss) Excluding Items
------------------------------------------------------
(Dollars in thousands, except per-share amounts.
All amounts shown net of tax.(a))
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- ---------------------
2003 2002 2003 2002
----------------------------------------------------------------------
Net income (loss) as
reported $ 34,057 $ (41,559) $ 161,488 $ 41,667
Capital lease termination (14,852) - (39,802) -
Investment write-downs - 27,393 - 58,049
Restructuring and other 6,003 10,986 6,112 13,511
Reserve for telecom
bankruptcies 1,342 6,011 1,369 10,843
Restricted stock based
compensation 2,676 151 3,565 1,431
Sale of assets (3,960) - (3,041) -
Early retirement of debt 2,615 (8,006) 541 (7,843)
Income from discontinued
operations - - - (167,848)
Cumulative effect of
accounting change - - (65,769) 39,812
-------------------- ---------------------
Net income (loss) excluding
items $ 27,881 $ (5,024) $ 64,463 $ (10,378)
==================== =====================
Net Income (Loss) Per Share
to Net Income (Loss) Per
Share Excluding Items
---------------------------
Net income (loss) per share
as reported $ 0.12 $ (0.15) $ 0.57 $ 0.15
Capital lease termination (0.05) - (0.14) -
Investment write-downs - 0.10 - 0.21
Restructuring and other 0.02 0.04 0.02 0.05
Reserve for telecom
bankruptcies - 0.02 - 0.04
Restricted stock based
compensation 0.01 - 0.01 0.01
Sale of assets (0.01) - (0.01) -
Early retirement of debt 0.01 (0.03) - (0.03)
Income from discontinued
operations - - - (0.60)
Cumulative effect of
accounting change - - (0.23) 0.14
-------------------- ---------------------
Net income (loss) per share
excluding items $ 0.10 $ (0.02) $ 0.22 $ (0.03)
==================== =====================
(a)Effective Tax Rate 40.64% 39.90% 39.44% 39.10%
Weighted Average Shares
Outstanding 282,180 280,610 281,934 280,432
Schedule B
Reconciliation of Non-GAAP Financial Measures
(Dollars in thousands)
Electric
ILEC Lightwave, Inc.
--------------------- ---------------------
For the quarter ended
June 30, 2003 2002 2003 2002
-------------------------------------------
Operating Income to Cash
Generated by Operations
------------------------
Operating income (loss) $ 121,814 $ 100,607 $ 2,350 $ (38,976)
Add back:
Depreciation and
amortization 144,374 154,741 5,985 31,591
Reserve for telecom
bankruptcies 1,113 9,567 1,147 434
Restructuring and other
expenses 9,482 9,207 631 9,073
Restricted stock based
compensation 3,715 194 578 116
-------------------------------------------
Cash Generated by
Operations $ 280,498 $ 274,316 $ 10,691 $ 2,238
===========================================
Gas and Electric
Sectors As Reported
--------------------- ---------------------
For the quarter ended
June 30, 2003 2002 2003 2002
-------------------------------------------
Operating Income to Cash
Generated by Operations
------------------------
Operating income (loss) $ 11,028 $ 20,937 $ 135,192 $ 82,568
Add back:
Depreciation and
amortization - 46 150,359 186,378
Reserve for telecom
bankruptcies - - 2,260 10,001
Restructuring and other
expenses - - 10,113 18,280
Restricted stock based
compensation 215 (59) 4,508 251
-------------------------------------------
Cash Generated by
Operations $ 11,243 $ 20,924 $ 302,432 $ 297,478
===========================================
Electric
ILEC Lightwave, Inc.
--------------------- ---------------------
For the six months ended
June 30, 2003 2002 2003 2002
-------------------------------------------
Operating Income to Cash
Generated by Operations
------------------------
Operating income (loss) $ 268,729 $ 192,828 $ 2,885 $ (55,996)
Add back:
Depreciation and
amortization 276,729 313,031 12,178 51,391
Reserve for telecom
bankruptcies 1,113 17,371 1,147 434
Restructuring and other
expenses 9,482 15,212 610 6,973
Restricted stock based
compensation 4,820 1,889 829 457
-------------------------------------------
Cash Generated by
Operations $ 560,873 $ 540,331 $ 17,649 $ 3,259
===========================================
Gas and Electric
Sectors As Reported
--------------------- ---------------------
For the six months ended
June 30, 2003 2002 2003 2002
-------------------------------------------
Operating Income to Cash
Generated by Operations
------------------------
Operating income (loss) $ 27,873 $ 46,095 $ 299,487 $ 182,927
Add back:
Depreciation and
amortization - 130 288,907 364,552
Reserve for telecom
bankruptcies - - 2,260 17,805
Restructuring and other
expenses - - 10,092 22,185
Restricted stock based
compensation 237 3 5,886 2,349
-------------------------------------------
Cash Generated by
Operations $ 28,110 $ 46,228 $ 606,632 $ 589,818
===========================================
Schedule C
Reconciliation of Non-GAAP Financial Measures
For the quarter For the six months
ended June 30, ended June 30,
--------------------- ---------------------
(Dollars in thousands) 2003 2002 2003 2002
-------------------------- ---------- ---------- ---------- ----------
Operating Income to Free
Cash Flow
------------------------
Operating income $ 135,192 $ 82,568 $ 299,487 $ 182,927
Add back:
Depreciation and
amortization 150,359 186,378 288,907 364,552
Restricted stock based
compensation 4,508 251 5,886 2,349
Subtract:
Cash paid for income taxes 926 9,539 1,236 10,895
Interest expense 107,988 121,499 218,817 244,659
Capital expenditures 67,850 94,119 115,602 162,558
---------- ---------- ---------- ----------
Free cash flow $ 113,295 $ 44,040 $ 258,625 $ 131,716
========== ========== ========== ==========
Schedule D
Reconciliation of Non-GAAP Financial Measures
For the quarter ended June 30,
-------------------------------------------
(Dollars in thousands) 2003 2002
-------------------------- --------------------- ---------------------
Net Debt to Annualized
Cash Generated by
Operations
--------------------------
Cash Generated by
Operations (1) $ 302,432 $ 297,478
Multiplied by:
Number of quarters 4 4
---------- ----------
Annualized Cash Generated
by Operations 1,209,728 1,189,912
Total debt (2) 4,662,168 5,403,338
Less:
Cash and cash
equivalents (2) 385,038 421,069
---------- ----------
Net debt 4,277,130 4,982,269
Divided by:
Annualized Cash Generated
by Operations (3) 1,209,728 1,189,912
Net Debt to Annualized Cash
Generated by Operations
Ratio 3.5 4.2
For the six months ended June 30,
-------------------------------------------
(Dollars in thousands) 2003 2002
-------------------------- --------------------- ---------------------
Net Debt to Annualized
Cash Generated by
Operations
--------------------------
Cash Generated by
Operations (1) $ 606,632 $ 589,818
Multiplied by:
Number of quarters 2 2
---------- ----------
Annualized Cash Generated
by Operations 1,213,264 1,179,636
Total debt (2) 4,662,168 5,403,338
Less:
Cash and cash
equivalents (2) 385,038 421,069
---------- ----------
Net debt 4,277,130 4,982,269
Divided by:
Annualized Cash Generated
by Operations (3) 1,213,264 1,179,636
Net Debt to Annualized Cash
Generated by Operations
Ratio 3.5 4.2
(1) See Schedule B.
(2) As reported in the Company's financial statements prepared in
accordance with GAAP.
(3) Annualized cash generated by operations and annualized operating
income present quarterly or six month information for purposes of
ratio analysis as annualized information by multiplying the
quarterly information by four and six month information by two,
without representing in any way a forecast, projection or estimate
of cash generated by operations or operating income for future
periods.
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