Citizens Utilities Files Separation Petitions With Regulatory Agencies in Four States.STAMFORD, Conn.--(BUSINESS WIRE)--October 22, 1998--Citizens Utilities (NYSE NYSE See: New York Stock Exchange : CZN, CZNPr) announced today that it has filed petitions with four state regulatory agencies state regulatory agency A state body responsible for establishing professional standards, and for certifying professionals or organizations through appropriate documentation for approval to proceed with its separation plan. The petitions request the authority to transfer Citizens' telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. businesses to a new company ("NewCo") as yet unnamed, as part of a tax-free spin-off The situation that arises when a parent corporation organizes a subsidiary corporation, to which it transfers a portion of its assets in exchange for all of the subsidiary's capital stock, which is subsequently transferred to the parent corporation's shareholders. of these businesses to Citizens' shareholders. Citizens filed the petitions with regulatory agencies 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. in Arizona, Louisiana, Tennessee and West Virginia West Virginia, E central state of the United States. It is bordered by Pennsylvania and Maryland (N), Virginia (E and S), and Kentucky and, across the Ohio R., Ohio (W). Facts and Figures Area, 24,181 sq mi (62,629 sq km). Pop. . The state filings contain information required by regulators to review the proposed transaction, including legal structures, management and financial data. Similar filings will be made over the next few weeks with other regulatory agencies including those in California and New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of . Citizens will soon file a request with the Internal Revenue Service for a private letter ruling that the spin-off transaction is not subject to federal income tax. An application with the Federal Communications Commission Federal Communications Commission (FCC), independent executive agency of the U.S. government established in 1934 to regulate interstate and foreign communications in the public interest. for the transfer of certain licenses, and filings with the Securities and Exchange Commission, will also be made during the separation process. The company received an order from the Federal Energy Regulatory Commission The Federal Energy Regulatory Commission (FERC) is the United States federal agency with jurisdiction over electricity sales, wholesale electric rates, hydroelectric licensing, natural gas pricing, and oil pipeline rates. (which became final in September) that granted an approval necessary to proceed with the separation plan. "We are moving full speed ahead with the separation," said Robert J. DeSantis, Citizens' chief financial officer. Commenting on the regulatory filings, DeSantis said: "The information contained in these filings demonstrates the advantages of the separation to both our customers and shareholders. We are hopeful that the regulatory agencies will act on them promptly and favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. ." The separation, announced on May 18, 1998, will divide Citizens' public services Public services is a term usually used to mean services provided by government to its citizens, either directly (through the public sector) or by financing private provision of services. businesses and telecommunications businesses into two stand-alone, publicly traded companies publicly traded company A company whose shares of common stock are held by the public and are available for purchase by investors. The shares of publicly traded firms are bought and sold on the organized exchanges or in the over-the-counter market. . The company expects to complete the separation in the second half of 1999. The goal of the separation is to enable each business to independently pursue its own strategies, operate and compete more effectively, thereby benefiting the customers of each business and increasing shareholder value. Citizens Utilities provides communications services and public services, including gas distribution, electric distribution, water distribution and wastewater treatment services to approximately 1.8 million customers in 21 states. Citizens owns 83% of Electric Lightwave, Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :ELIX), a leading full-service, facilities-based competitive local exchange carrier, and has a significant investment in Centennial Cellular Corp. (NASDAQ:CYCL), a cellular telephone company. Post separation, NewCo will comprise more than 900,000 access lines operated by 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. and an 83% interest in Electric Lightwave. Electric Lightwave and Citizens Communications will be operated as separate and independent entities. Citizens' public services businesses, providing approximately 860,000 customers with natural gas, synthetic gas, electricity, water and wastewater treatment services, will continue to trade publicly under the name Citizens Utilities after the separation is complete. 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 in the statements. These and all forward-looking statements 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, the company's ability to obtain the necessary regulatory and tax approvals and complete the separation process, changes in the local and overall economy, changes in market conditions for debt and equity securities, the nature and pace of technological changes, the number and effectiveness of competitors in the company's markets, success in overall strategy, weather conditions, changes in legal or regulatory policy, changes on legislation, the company's ability to identify future markets and successfully expand existing ones and the mix of products and services offered in the company's target 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 has no obligation 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 . Information summary follows Citizens Utilities Separation of Telecommunications Businesses and Public Services Businesses Information Summary NYSE: CZN, CZNPr October 1998 Company Structures On May 18, 1998 Citizens Utilities announced that it would separate its public services businesses and telecommunications businesses into two independent, publicly traded companies. The public services businesses are to remain under the Citizens name; the telecommunications businesses are to reside under a new company ("NewCo") as yet unnamed. The separation is expected to be completed during the second half of 1999. Citizens Utilities' Current Structure Citizens Utilities Citizens Public Services Citizens Communications Electric (Electric Distribution, Lightwave Inc. Gas Distribtion, Water Distribution (83% Ownership) and Wastewater Treatment Businesses} Citizens Utilities Post-Separation Structure Citizens Utilities Electric Gas Water Wastewater Distribution Distribution Distribution Treatment NewCo Post-Separation Structure NewCo Citizens Communications Electric Lightwave Inc. Non-operating (83% Ownership) telecommunications investments Separation Milestones Second Quarter 1998 - Separation announced - Petition filed with the Federal Energy Regulatory Commission (FERC FERC Federal Energy Regulatory Commission FERC FEMA Emergency Response Capability ) Third Quarter 1998 - FERC Order received - FERC Order rehearing rehearing n. conducting a hearing again based on the motion of one of the parties to a lawsuit, petition or criminal prosecution, usually by the court or agency which originally heard the matter. period ends; Order finalized See finalization. Fourth Quarter 1998 - Petitions filed with state regulatory agencies for approval of the transfer of Citizens' telecommunications businesses to NewCo. - Separation details announced, including management teams - Private letter ruling request filed with the Internal Revenue Service (IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. ) - Third-quarter earnings announced First Quarter 1999 - First road show held - 1998 fourth-quarter and year-end earnings announced Second Quarter 1999 - Separation filings made with the Securities and Exchange Commission (SEC) - IRS private letter ruling expected - First-quarter earnings announced - Annual meeting of shareholders - Second road show held Second Half 1999 - Separation filings expected to be declared effective by SEC - Debt allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as - Third road show held - All state regulatory agency approvals expected - Separation completed Citizens Utilities, Post Separation Citizens' post-separation investment features will be appealing to income and moderate growth investors: -- Favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. risk/return compared to alternative utility investments, due to the company's geographic and service mix -- Internal growth through a diversified diversified (di·verˑ·s portfolio of utility properties -- External growth through appropriate acquisition opportunities, adhering ADHERING. Cleaving to, or joining; as, adhering to the enemies of the United States. 2. The constitution of the United States, art. 3, s 3, defines treason against the United States, to consist only in levying war against them or in adhering to their enemies, to strict operational and financial criteria After the separation, Citizens Utilities will retain the public services businesses it currently operates in ten states: Services Customers States Gas transmission and distribution: 450,000 Arizona, Colorado, Hawaii, Louisiana Electric transmission and distribution: 110,000 Arizona, Hawaii, Vermont Water distribution and Wastewater treatment: 300,000 Arizona, Illinois, California, Pennsylvania, Ohio, Indiana The customer base of these businesses has grown at a five-year compounded annual rate of 5%. The public services businesses generate about $600 million in annual revenue and $100 million in annual 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. , based on recent operating results. Citizens' capacity to generate earnings and free cash flow is expected to strengthen its credit profile. Assuming that the separation is completed in the second half of 1999, Citizens' ratio of equity to debt and equity capital should improve to almost 50% soon thereafter. Citizens should have both a stronger balance sheet and more flexibility in managing its capital structure than might have been the case without the separation. Of the $1.7 billion of Citizens' December 31, 1997 debt balance, $400 million is expected to be redeemed re·deem tr.v. re·deemed, re·deem·ing, re·deems 1. To recover ownership of by paying a specified sum. 2. To pay off (a promissory note, for example). 3. or otherwise offset with an equal amount of cash and investments. Of the remaining $1.3 billion, approximately $550 to $650 million of net debt is expected to remain with Citizens and $650 to $750 million of net debt is expected to be transferred to NewCo. Citizens' credit profile will reflect its post-separation capital structure, with senior debt ratings expected to be in the "A" to "BBB BBB A medium grade assigned to a debt obligation by a rating agency to indicate an adequate ability to pay interest and repay principal. However, adverse developments are more likely to impair this ability than would be the case for bonds rated A and above. " (or equivalent) range. No rating agency has issued a rating with respect to either of the two companies' post-separation credit quality. Citizens' senior management team, as filed with state regulatory agencies, will be: - Chairman and Chief Executive Officer: Daryl A. Ferguson - President and Chief Operating Officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. : J. Michael Love - Vice President, Finance: Kenneth L. Cohen cohen or kohen (Hebrew: “priest”) Jewish priest descended from Zadok (a descendant of Aaron), priest at the First Temple of Jerusalem. The biblical priesthood was hereditary and male. - Vice President and Controller: Livingston E. Ross - Assistant Vice President and Secretary: Charles J. Weiss - Vice President, Regulatory Affairs Regulatory Affairs (RA), also called Government Affairs, is a profession within regulated industries, such as pharmaceuticals, medical devices, energy, and banking. Regulatory Affairs professionals usually have responsibility for the following general areas: Counsel: Susan M. Redner NewCo NewCo will be a combination of two businesses: a well-established incumbent local exchange carrier ILEC, short for incumbent local exchange carrier, is a local telephone company in the United States that was in existence at the time of the break up of AT&T into the Regional Bell Operating Companies (RBOCs) also known as the "Baby Bells". (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. ) in Citizens Communications and a rapidly growing competitive local exchange carrier (CLEC (Competitive Local Exchange Carrier) An organization offering local telephone service that is not one of the traditional telephone companies. The Telecommunications Act of 1996 allowed competition to the incumbent telcos (ILECs), enabling new companies (CLECs) ) in Electric Lightwave (NASDAQ: ELIX). Citizens Communications will be 100% owned by NewCo and will continue to provide business and residential customers with a complete portfolio of telecommunications products and services, including local telephone exchange services and long-distance services such as 1+direct dial, intraLata and interLATA within the state, nationally and internationally, cable television, cellular, Internet, conference calling and international dial-back, as well as a complete line of high-speed data communications data communications, application of telecommunications technology to the problem of transmitting data, especially to, from, or between computers. In popular usage, it is said that data communications make it possible for one computer to "talk" with another. products for corporate and wholesale customers. Citizens Communications will have over 900,000 access lines, and will be a key contributor to NewCo's investment appeal. After the separation Citizens Communications will operate telephone local exchange and long-distance businesses in thirteen states: State Access Lines New York 300,000 West Virginia 142,000 Arizona 134,000 California 127,000 Tennessee 100,000 Nevada 25,000 Utah 22,000 Idaho 21,000 Wisconsin* 20,000 Oregon 14,000 Montana 8,000 New Mexico New Mexico, state in the SW United States. At its northwestern corner are the so-called Four Corners, where Colorado, New Mexico, Arizona, and Utah meet at right angles; New Mexico is also bordered by Oklahoma (NE), Texas (E, S), and Mexico (S). 5,000 Pennsylvania 1,000 * To be acquired before the end of 1998 Access lines have grown at a five-year compounded annual rate of 44% (internal growth rate approximately 4%). Citizens Communications generates about $875 million in annual revenue and $160 million in annual operating income, based on recent operating results. Electric Lightwave, a full-service, facilities-based integrated communications provider (a CLEC with additional national data and long-haul services), will be 83% owned by NewCo. The remaining 17% is publicly traded. Electric Lightwave Market Areas Electric Lightwave generates nearly $100 million in annual revenue and has approximately $570 million in gross property, plant and equipment based on recent operating results. NewCo's investment features will be a good match with the goals of growth investors: - Citizens Communications is poised to become the nation's largest rural/suburban telephone company - Citizens Communications should experience internal growth through increased penetration of product and service offerings - Citizens Communications should achieve external growth through aggressive acquisition strategies - Electric Lightwave provides significant revenue growth based on a solid installed fiber base in growing markets, a new scaleable integrated business system platform and expanding national data markets - Electric Lightwave has superior operational characteristics compared to other CLECs (high gross margins; high percentage of on-switch business; focus on data services for communications-intensive businesses) - "All strategic options are open for Electric Lightwave" - including participation in the consolidating CLEC industry Newco's pro-forma capital structure at December 31, 1997 is somewhat stronger than Citizens' December 31, 1997 consolidated capital structure but is expected to become more leveraged due to Electric Lightwave's ongoing capital requirements Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. . Initially, NewCo's ratio of equity to debt and equity capital should approximate 60%. Of the $1.7 billion of Citizens' December 31, 1997 debt balance, $400 million is expected to be redeemed or otherwise offset with an equal amount of cash and investments. Of the remaining $1.3 billion, approximately $650 to $750 million of net debt is expected to transfer to NewCo and $550 to $650 million of net debt is expected to remain with Citizens. NewCo's capital structure will be capable of supporting expansion, with a senior debt rating expected to be in the "A" to "BBB" (or equivalent) range. No rating agency has issued a rating with respect to either of the two companies' post-separation credit quality. NewCo's senior management team, as filed with the state regulatory agencies, will be: - Chairman, President and Chief Executive Officer: Leonard Tow - President and Chief Operating Officer, Electric Lightwave Inc,: David B.Sharkey - President and Chief Operating Officer, Citizens Communications: O. Lee Jobe - Chief Financial Officer, Vice President and Controller: Robert J. DeSantis - Vice President, General Counsel and Secretary: L. Russell Mitten 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 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, the company's ability to obtain the necessary regulatory and tax approvals and complete the separation process, changes in the local and overall economy, changes in market conditions for debt and equity securities, the nature and pace of technological changes, the number and effectiveness of competitors in the company's markets, success in overall strategy, weather conditions, changes in legal or regulatory policy, changes on legislation, the company's ability to identify future markets and successfully expand existing ones and the mix of products and services offered in the company's target 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 has no obligation to update or revise these forward-looking statements to reflect the occurrence of future events or circumstances |
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