SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report:
(Date of earliest event reported)
June 29, 2001
CITIZENS COMMUNICATIONS COMPANY
-------------------------------
(Exact name of registrant as specified in charter)
Delaware 001-11001 06-0619596
---------------------------- --------------------------- -------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
3 High Ridge Park, P.O. Box 3801, Stamford, Connecticut 06905
-------------------------------------------------------- -----
(Address of principal executive offices) (Zip code)
(203) 614-5600
--------------
(Registrant's telephone number, including area code)
No change since last report
---------------------------
(Former name or former address, if changed since last report)
Item 5. Other Events.
-------------
On June 29, 2001, we completed our previously announced acquisition of
Global Crossing's local exchange telephone business, which operates under
the name Frontier Telephone (Frontier) for $3,368,000,000 in cash (subject
to purchase price adjustment).
On July 2, 2001, we completed our previously announced sale of our
Louisiana Gas operations to Atmos Energy Corporation for approximately
$363,400,000 in cash.
On July 20, 2001, we terminated our previously announced acquisition
agreements with Qwest Communications International, Inc.
We had previously filed on Form 8-K, on May 7, 2001, the audited financial
statements for the Frontier Local Exchange Carrier Businesses for the years
ended December 31, 2000, 1999 and 1998; and the audited financial
statements of the selected U S WEST (Qwest) exchanges for the years ended
December 31, 2000, 1999 and 1998. We also included in that Form 8-K a pro
forma balance sheet (as of December 31, 2000) and a pro forma income
statement (for the year ended December 31, 2000). These pro forma
statements reflected at that time, our probable acquisitions of Frontier
and the selected U S WEST exchanges in addition to our probable
acquisitions of the remaining Verizon exchanges to be acquired and our
previously announced dispositions of our public services operations.
In this Form 8-K, we are filing the March 31, 2001 financial statements of
the Frontier business acquired and pro forma financial information related
to the Frontier business acquired and the disposition of our Louisiana Gas
operations as of March 31, 2001 and for the year ended December 31, 2000
and for the three months ended March 31, 2001.
This Current Report on Form 8-K 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.
Statements that are not historical facts are forward-looking statements
made pursuant to the Safe Harbor Provisions of the Litigation Reform Act of
1995. In addition, words such as "believes", "anticipates", "expects" and
similar expressions are intended to identify "forward-looking statements".
Forward-looking statements (including oral representations) are only
predictions or statements of current plans, which we review continuously.
All forward-looking statements may differ from actual results because of,
but not limited to, 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 our
markets, success in overall strategy, changes in legal or regulatory
policy, changes in legislation, our ability to identify future markets and
successfully expand existing ones, the mix of products and services offered
in our target markets, the effects of acquisitions and dispositions and the
ability to effectively integrate businesses acquired. These important
factors should be considered in evaluating any statement contained herein
and/or made by us or on our behalf. We do not intend to update or revise
these forward-looking statements to reflect the occurrence of future events
or circumstances.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
------------------------------------------------------------------
(a) Financial Statements of Business acquired
* Frontier Incumbent Local Exchange Carrier Business for the three months
ended March 31, 2001.
(b) Pro forma Financial Information
* Pro forma Balance Sheet as of March 31, 2001 and Pro forma Income
Statements for the three months ended March 31, 2001 and the year ended December
31, 2000
SIGNATURE
------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CITIZENS COMMUNICATIONS COMPANY
----------------------------------------------------------
(Registrant)
By: /s/ Robert J. Larson
--------------------------------------------
Robert J. Larson
Vice President and Chief Accounting Officer
Date: August 10, 2001
FRONTIER INCUMBENT LOCAL EXCHANGE CARRIER BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 2000
FRONTIER INCUMBENT LOCAL EXCHANGE CARRIER BUSINESSES
COMBINED FINANCIAL STATEMENTS
AS OF MARCH 31, 2000 AND 2001
UNAUDITED
FRONTIER INCUMBENT LOCAL EXCHANGE CARRIER BUSINESSES UNAUDITED
COMBINED BALANCE SHEETS
December 31, 2000 and March 31, 2001
(in thousands of dollars)
December 31, 2000 March 31, 2001
------------------------ ---------------------
ASSETS:
Current assets:
Cash and cash equivalents $ 41,550 $ 45,235
Telecommunications accounts receivable 112,955 96,320
Accounts receivable, affiliates 68,880 17,319
Advances to affiliates 311,752 364,016
Materials and supplies 1,389 1,889
Deferred income taxes 7,618 7,836
Notes receivable, affiliate 1,031,095 1,005,822
Prepayments and other 32,759 32,505
----------------- ----------------
Total current assets 1,607,998 1,570,942
Property, plant, and equipment, net 1,052,745 1,059,248
Goodwill and customer base, net 1,521,250 1,503,500
Due from affiliate 46,932 54,321
Other assets 18,709 19,436
----------------- ----------------
Total assets $ 4,247,634 $ 4,207,447
================= ================
LIABILITIES AND SHAREHOLDER'S EQUITY:
Current liabilities:
Accounts payable $ 102,637 $ 75,045
Accounts payable, affiliates 113,606 96,115
Advances from affiliates 26,225 48,139
Deferred credits 2,997 2,589
Current portion of long-term debt 3,142 3,185
Accrued income taxes 20,508 14,470
Advanced billings 11,852 15,984
Notes payable 1,000,000 1,000,000
Other current liabilities 16,478 11,937
----------------- ----------------
Total current liabilities 1,297,445 1,267,464
Long-term debt, net of current maturities 116,057 115,225
Notes payable to affiliates 4,700 2,400
Deferred income taxes 120,124 118,775
Post-retirement benefit obligation 109,617 110,051
Due to affiliate 24,852 31,942
Other long-term liabilities 9,063 9,227
----------------- ----------------
Total liabilities 1,681,858 1,655,084
----------------- ----------------
Shareholder's equity:
Contributed capital 2,609,961 2,614,049
Accumulated deficit (44,185) (61,686)
----------------- ----------------
Total shareholder's equity 2,565,776 2,552,363
----------------- ----------------
Total liabilities and shareholder's equity $ 4,247,634 $ 4,207,447
================= ================
The accompanying notes to financial statements are an integral part of these
balance sheets.
FRONTIER INCUMBENT LOCAL EXCHANGE CARRIER BUSINESSES
COMBINED STATEMENTS OF INCOME
FOR THE THREE MONTH PERIODS ENDED
MARCH 31, 2000 AND 2001
(in thousands of dollars)
January 1, January 1,
2000 2001
through through
March 31, March 31,
2000 2001
------------------ ------------------
Revenues $ 188,122 $ 192,268
Costs and expenses:
Operating expenses 87,409 91,161
Depreciation and amortization 52,385 51,625
Taxes other than income taxes 9,564 4,374
------------------ ------------------
Total costs and expenses 149,358 147,160
------------------ ------------------
Operating income 38,764 45,108
Interest expense (1,683) (21,680)
Interest income 7,748 24,222
Equity in earnings on investments in affiliates 489 381
Other income (expense), net (554) (39,161)
------------------ ------------------
Income before taxes 44,764 8,870
Income tax expense 23,025 3,371
------------------ ------------------
Net income $ 21,739 $ 5,499
================== ==================
The accompanying notes to financial statements are an integral part of these
statements.
FRONTIER INCUMBENT LOCAL EXCHANGE CARRIER BUSINESSES
COMBINED STATEMENTS OF CASH FLOWS
COMBINED STATEMENTS OF INCOME
FOR THE THREE MONTH PERIODS ENDED
MARCH 31, 2000 AND 2001
(in thousands of dollars)
January 1, January 1,
2000 2001
Through Through
March 31, March 31,
2000 2001
---------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 21,739 $ 5,499
---------------- ----------------
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 52,385 51,625
Foreign Exchange Loss - 38,881
(Gain)/loss on sale of assets - -
Equity in earnings on investments in affiliates - (381)
Changes in operating assets and liabilities,
exclusive of impacts of dispositions and acquisitions:
Accounts receivable 8,499 16,635
Accounts receivable affiliates and due from affiliates - 44,172
Material and supplies (168) (500)
Prepayments and other current assets 4,659 254
Other assets (1,775) (31,604)
Accounts payable (21,669) (28,000)
Accounts payable affiliates and due to affiliates - (10,401)
Accrued taxes, advanced billings and other liabilities 12,896 (8,583)
Post-retirement benefit obligation 1,198 434
Deferred income taxes (5,247) (1,567)
---------------- ----------------
Total adjustments 50,778 70,965
---------------- ----------------
Net cash provided by operating activities 72,517 76,464
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant, and equipment (50,940) (39,887)
Distributions from investment in affiliates - 560
Advance to affiliates (33,100) (52,264)
---------------- ----------------
Net cash used in investing activities (84,040) (91,591)
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt borrowings -
Repayments of debt (860) (3,173)
Dividends paid (7,750) -
Advances from affiliates - 21,914
Other financing activities - 71
---------------- ----------------
Cash flows used in financing activities (8,610) 18,812
---------------- ----------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (20,133) 3,685
CASH AND CASH EQUIVALENTS, beginning of period 83,842 41,550
---------------- ----------------
CASH AND CASH EQUIVALENTS, end of period $ 63,709 $ 45,235
================ ================
The accompanying notes to financial statements are an integral part of these
statements.
FRONTIER INCUMBENT LOCAL EXCHANGE CARRIER BUSINESSES
NOTES TO COMBINED FINANCIAL STATMENTS
AS OF DECEMBER 31, 1999 AND 2000
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Description of Business and Organization
----------------------------------------
The accompanying combined financial statements include the following wholly
owned subsidiaries of Global Crossing North America ("GCNA"):
Frontier Telephone of Rochester, Inc. ("FTR") Frontier Communications of Seneca-Gorham, Inc.
Frontier Communications of Rochester, Inc. Frontier Communications of New York, Inc.
Frontier Subsidiary Telco Inc. and Subsidiaries Frontier Communications of Ausable Valley, Inc.
Frontier Communications of Sylvan Lake, Inc.
These entities are hereafter collectively referred to as the Frontier Incumbent
Local Exchange Businesses (the "Company" or the "Frontier ILEC's"). The Frontier
ILEC's, headquartered in Rochester, New York, are providers of local telephone
services to customers in 11 states.
Citizens Transaction
--------------------
On July 11, 2000, GCNA and GCNA's parent company, Global Crossing Limited,
signed a Stock Purchase Agreement (the "Agreement") with Citizens Communications
Company ("Citizens") to sell the Frontier ILEC's to Citizens for $3.65 billion,
subject to adjustment under the terms of the Agreement.
In February 2001, the Agreement with Citizens was amended to provide for the
transfer of certain assets and liabilities related to GCNA's qualified pension
and other postretirement benefits from GCNA to Citizens. Assets and liabilities
for virtually all retirees and all transferring active employees will be
transferred upon the sale. GCNA will retain only those liabilities and assets
associated with certain active nontransferring Global Crossing employees.
In April 2001, the Agreement with Citizens was amended to provide for, among
other things, (i) an acceleration of the anticipated closing date for the
transaction, (ii) an adjustment to the purchase price, which reflects a
reduction in the amount of cash to be received by Global Crossing at closing in
connection with the transaction from $3.65 billion to $3.5 billion, subject to
adjustments concerning closing date liabilities and working capital balances,
and (iii) a $100 million credit, which will be applied against future services
to be rendered to Citizens over a five year period.
The transaction closed on June 30, 2001.
Principles of Combination
-------------------------
The combined financial information includes the companies identified above and
their majority-owned subsidiaries after elimination of all significant
intercompany transactions. Investments in entities in which the Company does not
have a controlling interest are accounted for using the equity method.
FRONTIER INCUMBENT LOCAL EXCHANGE CARRIER BUSINESSES
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 2000
Basis of Presentation
---------------------
These unaudited consolidated financial statements include all adjustments, which
consist of normal recurring accruals necessary to present fairly the results for
the interim period shown and should be read in conjunction with our consolidated
audited financial statements for the year ended December 31, 2000. Certain
information and footnote disclosures have been condensed pursuant to Securities
and Exchange Commission rules and regulations. The results of the interim
periods are not necessarily indicative of the results for the full year.
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. It is the Company's policy to
reclassify prior year balances to conform to current year presentation.
Revenue Recognition
-------------------
The Company derives revenue primarily from charges for local telephone services,
network access for interconnection of long distance companies, directory
advertising, billing and collection, and other services provided to long
distance companies. The Company also derives revenue from the sale, leasing, and
maintenance of telephone equipment and the sale of enhanced services such as
voice mail, custom calling features, Internet, and advanced number
identification products such as Caller ID. Customers are billed on monthly cycle
dates. Revenue is recognized as service is provided. An estimate for
uncollectible accounts is recorded in operating expenses. Unbilled usage is
accrued. Certain revenues derived from local telephone services are billed
monthly in advance and are recognized the following month when services are
provided. Customers are billed an activation fee upon installation which is
deferred by the Company and amortized over the estimated average customer life
in accordance with Staff Accounting Bulletin No. 101.
Allocation of Corporate Overhead
--------------------------------
The results of operations of the Company include allocations of corporate
expenses from GCNA. These costs primarily include executive, corporate planning,
legal, tax, human resources, treasury, corporate communications, and corporate
accounting functions. They are allocated to the Company based on a weighted
average of four factors: employees, revenues, capitalization, and common equity.
Allocations of these corporate mutually beneficial costs is performed on a basis
management considers reasonable.
Other Comprehensive Income
--------------------------
The Company did not have any other comprehensive income in 2000 and 2001.
Proforma Financial Information
Frontier Acquisition
--------------------
On July 12, 2000, we announced a definitive agreement to purchase from
Global Crossing Ltd. (Global) 100% of the stock of Frontier Corp., which
owned approximately 1,096,700 telephone access lines (as of December 31,
2000) in Alabama/Florida, Georgia, Illinois, Indiana, Iowa, Michigan,
Minnesota, Mississippi, New York, Pennsylvania and Wisconsin, for
approximately $3,650,000,000 in cash which price was later reduced to
$3,500,000,000. On June 29, 2001, we closed on the Frontier acquisition for
approximately $3,368,000,000 in cash, subject to purchase price adjustment.
Louisiana Gas Disposition
-------------------------
On April 13, 2000, we announced the agreement to sell our Louisiana Gas
operations to Atmos Energy Corporation for $365,000,000 in cash plus the
assumption of certain liabilities. Regulatory approval was received in
April 2001. On July 2, 2001, we closed on the sale for $363,400,000 in
cash. The estimated pre-tax gain on the sale is approximately $150,000,000
that will be recognized in the third quarter of 2001. The Louisiana Gas
Operations were reported as assets held for sale and liabilities related to
assets held for sale on our December 31, 2000 and March 31, 2001 balance
sheets.
The following unaudited pro forma condensed combined financial information
of Citizens Communications Company, the Frontier Acquisition and the
Louisiana Gas Disposition, which is referred to as "Pro Forma Citizens
Communications Company," has been prepared to illustrate the effects of the
Frontier Acquisition and related financing (including the sale of the
Louisiana Gas operations) had the Acquisition and Disposition been
completed as of March 31, 2001 for the pro forma balance sheet and at the
beginning of each period presented for the pro forma income statements. The
Frontier Acquisition column on the pro forma balance sheet represents the
balance sheet of the Frontier Acquisition at March 31, 2001.
We have prepared the pro forma financial information using the purchase
method of accounting for the Frontier Acquisition. We expect to achieve
economies of scale with the acquired properties that will both expedite our
ability to provide an expanded menu of telecommunication services and make
those services incrementally more profitable but can provide no assurance
that such economies will be realized. We expect that this acquisition will
therefore provide us the opportunity to increase revenue and decrease cost
per access line. The unaudited pro forma information reflects the increased
expenses to the extent they have been incurred in the periods presented,
but does not reflect economies of scale.
Certain of our regulated telecommunications operations are subject to the
provisions of Statement of Financial Accounting Standards (SFAS) No. 71,
"Accounting for the Effects of Certain Types of Regulation." SFAS 71
requires regulated entities to record regulatory assets and liabilities as
a result of actions of regulators. We are currently evaluating the
continued applicability of SFAS 71. We are not accounting for the Frontier
Acquisition under SFAS 71.
The pro forma information, while helpful in illustrating the financial
characteristics of the combined company, does not attempt to predict or
suggest future results. The pro forma information also does not attempt to
show how the combined company would actually have performed had Citizens
and Frontier been combined at the beginning of the periods presented and
the Louisiana Gas property been sold at those times. If the companies had
actually been combined at the beginning of the period, these companies and
businesses might have performed differently. You should not rely on pro
forma financial information as an indication of the results that would have
been achieved if the Acquisition and Disposition had taken place earlier or
the future results that the companies will experience.
These unaudited pro forma condensed combined financial statements should be
read in conjunction with the historical financial statements of Frontier
and the historical financial statements of Citizens Communications Company.
Citizens Communications Company and Subsidiaries
Pro Forma Balance Sheet Data
As of March 31, 2001
(unaudited)
Pro Forma
Citizens ------------------------------------------------------
Communications Frontier
(Amounts in thousands) 3/31/2001 Acquisition Adjustments Adjusted
-------------------------------------------------------------------------
Cash $ 28,448 $ 45,235 $ 363,400 (1) $ 73,683
(363,400) (2)
Accounts receivable, net 229,605 1,483,477 (1,387,157) (2) 325,925
Short-term investments 5,630 - - 5,630
Other current assets 16,115 42,230 - 58,345
Assets held for sale 1,222,773 - (247,459) (1) 975,314
Assets of discontinued operations 673,994 - - 673,994
--------------------------------------------------- ----------------
Total current assets 2,176,565 1,570,942 (1,634,616) 2,112,891
Net property, plant & equipment 3,508,257 1,059,248 - 4,567,505
Excess cost over net assets acquired 621,547 1,503,500 1,079,438 (2) 3,204,485
Investments 181,851 - - 181,851
Regulatory assets 174,902 - (16,050) (1) 158,852
Deferred debits and other assets 148,581 73,757 (16,126) (1) 151,891
(54,321) (2)
--------------------------------------------------- ----------------
Total assets $ 6,811,703 $ 4,207,447 $ (641,675) $ 10,377,475
=================================================== ================
Long-term debt due within one year $ 181,215 $ 3,185 $ - $ 184,400
Accounts payable and other current liabilities 299,481 1,264,279 59,384 (1) 478,890
(1,144,254) (2)
Liabilities related to assets held for sale 260,810 - (55,315) (1) 205,495
Liabilities of discontinued operations 185,197 - - 185,197
--------------------------------------------------- ----------------
Total current liabilities 926,703 1,267,464 (1,140,185) 1,053,982
Deferred income taxes 490,007 118,775 (5,408) (1) 603,374
Customer advances for construction
and contributions in aid of construction 203,012 - - 203,012
Deferred credits and other liabilities 104,913 153,620 (34,342) (2) 224,191
Regulatory liabilities 24,001 - (1,920) (1) 22,081
Long-term debt 2,981,496 115,225 2,715,732 (2) 5,812,453
--------------------------------------------------- ----------------
Total liabilities 4,730,132 1,655,084 1,533,877 7,919,093
Equity forward contracts 150,013 - - 150,013
Company Obligated Mandatorily Redeemable
Convertible Preferred Securities * 201,250 - - 201,250
Shareholders' equity 1,730,308 2,552,363 87,024 (1) 2,107,119
(2,552,363) (2)
289,787 (2)
--------------------------------------------------- ----------------
Total liabilities and shareholders' equity $ 6,811,703 $ 4,207,447 $ (641,675) $ 10,377,475
=================================================== ================
*Represents securities of a subsidiary trust, the sole assets of which are
securities of a subsidiary partnership, substantially all the assets of
which are convertible debentures of the Company.
See Notes to Pro Forma Condensed Financial Statements.
Citizens Communications Company and Subsidiaries
Proforma Income Statement Data
For the three month period ended March 31, 2001
(unaudited)
Frontier Proforma Total
(Amounts in thousands, except Citizens Frontier ------------------------- LGS Adjusted
per-share amount) Communications Acquisition Adjustments Adjusted Disposition Proforma
------------------------------------------------------------------------------------
Revenue $ 624,281 $ 192,268 $ - 816,549 $ 150,488 666,061
Operating expenses 430,692 95,535 - 526,227 134,421 391,806
Depreciation and amortization 105,706 51,625 27,991 (3) 185,322 - 185,322
---------------------------------------- ---------------------------------------
Income from operations 87,883 45,108 (27,991) 105,000 $ 16,067 $ 88,933
Investment and other income, net 2,784 (14,558) 38,881 (4) 27,107 - 27,107
Interest expense 61,452 21,680 53,916 (5) 137,048 219 136,829
Convertible preferred dividends 1,553 - - 1,553 - 1,553
---------------------------------------- ---------------------------------------
Pre-tax income 27,662 8,870 (43,026) (6,494) 15,848 (22,342)
Income tax expense (benefit) 9,047 3,371 (6,992) (6) 5,426 5,430 (4)
---------------------------------------- ---------------------------------------
Income (loss) from continuing operations $ 18,615 $ 5,499 $ (36,034) $(11,920) $ 10,418 $ (22,338)
======================================== =======================================
Weighted average shares outstanding -Basic 263,036 25,156 (7) 288,185
Weighted average shares outstanding -Diluted 270,283 25,156 (7) 295,432
Loss from continuing operations per basic share $ 0.07 $ (0.04)
Loss from continuing operations per diluted share $ 0.07 $ (0.04)
See Notes to Pro Forma Condensed Financial Statements.
Citizens Communications Company and Subsidiaries
Proforma Income Statement Data
For the year ended December 31, 2000
(unaudited)
Frontier Proforma
(Amounts in thousands, except Citizens Frontier -------------------------------- LGS Adjusted
per-share amounts) Communications Acquisition Adjustments Adjusted Disposition Proforma
----------------------------------------------------------------------------------------
Revenue $ 1,802,358 $ 746,302 $ - $ 2,548,660 $ 223,718 $2,324,942
Operating expenses 1,292,950 370,893 - 1,663,843 221,647 1,442,196
Depreciation and amortization 387,607 200,669 111,963 (3) 700,239 - 700,239
----------------------------------------- -------------------------------------------
Income from operations 121,801 174,740 (111,963) 184,578 2,071 182,507
Investment and other income, net 3,350 64,583 (21,900) (4) 46,033 437 45,596
Minority interest 12,222 - - 12,222 - 12,222
Interest expense 187,366 24,067 215,666 (5) 427,099 69 427,030
Convertible preferred dividends 6,210 - - 6,210 - 6,210
----------------------------------------- -------------------------------------------
Pre-tax income (56,203) 215,256 (349,528) (190,475) 2,439 (192,914)
Income tax expense (benefit) (16,132) 103,417 (117,924) (6) (30,639) (5,295) (25,344)
----------------------------------------- -------------------------------------------
Income (loss) from continuing operations $ (40,071) $ 111,839 $ (231,604) $ (159,836) $ 7,734 $ (167,570)
========================================= ===========================================
Weighted average shares outstanding
-Basic 261,744 25,156 (7) 286,893
Weighted average shares outstanding
-Diluted 266,931 25,156 (7) 292,080
Loss from continuing operations
per basic share $ (0.15) $ (0.45)
Loss from continuing operations
per diluted share $ (0.15) $ (0.45)
See Notes to Pro Forma Condensed Financial Statements.
Notes to Pro Forma Condensed Financial Statements
(1) Reflects the effect of the sale of our Louisiana Gas operations, one of our
public utilities services properties, including adjustments for the
estimated income taxes due on the gain.
(2) Represents the acquisition of the stock of the Frontier Acquisition. The
acquisition is assumed to be funded from the cash proceeds of the sale of
our Louisiana Gas operations, the issuance of long-term debt securities and
the issuance of equity securities. The following represents the adjustment
to record the Acquisition:
(In thousands)
Elimination of historical shareholders' equity of the Frontier Acquisition $ (2,552,363)
Elimination of related party balances of Frontier, net (a) 262,882
Proceeds from the sale of Louisiana Gas 363,400
Issuance of long-term debt (Note 5) 2,715,732
Issuance of equity (Note 7) 289,787
------------
Excess of cost over net assets acquired $ 1,079,438
============
(a) The Frontier related party balances are included in accounts receivable,
net, other assets, accounts payable and other liabilities. Upon acquisition
by Citizens, certain related party balances were settled by Frontier's
parent. The remaining amount, representing a net receivable of $262.9
million, (accounts receivable of $1,387.2 million, deferred debits and
other assets of $54.3 million, accounts payable and other current
liabilities of $1,144.3 million and deferred credits and other liabilities
of $34.3 million) was eliminated at the date of acquisition. As a result,
all of these related party balances have been eliminated as part of the pro
forma adjustments with the difference resulting in an increase to "Excess
cost over net assets acquired."
For purposes of the accompanying pro forma combined financial statements,
we have reflected the assets acquired at their historical carrying values
and have reflected the excess of cost over such amounts as excess of cost
over net assets acquired. The final allocation of purchase price to assets
and liabilities acquired will depend upon the final purchase price and the
final estimate of fair values of the assets and liabilities acquired. We
undertake studies to determine the fair values of assets acquired and
allocate the purchase prices accordingly. We believe that the excess of
cost over historical net assets acquired will be allocated to property,
plant and equipment, customer base, other identifiable intangibles and
goodwill. However, there can be no assurance that the actual allocation
will not differ significantly from the pro forma allocation.
(3) Reflects amortization expense of the excess of cost over net assets
acquired in the Frontier Acquisition using the straight-line method over a
15 year period. Should the allocation of such excess of cost over
historical net assets acquired differ significantly from that described in
Note 2, amortization expense could be impacted since the depreciable lives
of assets other than goodwill may be shorter or longer than 15 years.
On September 30, 1999, Global Crossing acquired Frontier Corporation and
all of its subsidiaries (including the businesses that we are acquiring),
in a merger transaction. In accordance with Accounting Principles Board
Opinion No. 16, "Business Combinations", the purchase price was allocated
to Frontier Corporation and its subsidiaries based upon their fair market
value at the date of the acquisition. Frontier was amortizing the
associated goodwill over a 25-year period. Citizens included amortization
of goodwill over a 15-year period for the full year 2000 and the three
months ended March 31, 2001.
(4) Represents the reversal of a foreign exchange gain of $21,900,000 for the
year ended December 31, 2000 and a foreign exchange loss of $38,881,000 for
the quarter ended March 31, 2001 recorded by Frontier Corp. related to a
note receivable due from an affiliate of Frontier. Such note is not part of
the assets acquired by Citizens.
(5) Represents pro forma interest expense from the beginning of the periods
presented on the debt assumed to have been issued to partially fund the
Frontier Acquisition. On May 18, 2001, we issued an aggregate of $1.75
billion of notes consisting of $700 million principal amount of 8.50%
notes, due May 15, 2006 and $1.05 billion principal amount of 9.25% notes
due May 15, 2011. The net proceeds of this issuance was $1,726,000,000
(after underwriting discounts and commissions and before offering
expenses). Of this amount, $650 million was used to pay down borrowings
under existing bank credit lines. On June 13, 2001, we issued 18,400,000
equity units at $25 per unit for net proceeds of $446,200,000 (after
underwriting discounts and commissions and before offering expenses). Each
equity unit consists of a 6 3/4 % senior note due 2006 and a purchase
contract for our common stock. The remainder of the debt assumed to have
been issued to finance the Frontier Acquisition was at an assumed interest
rate of 8.10%.
(6) Represents adjustments to income taxes based on income before income taxes
using the applicable incremental income tax rate.
(7) On June 13, 2001, we issued 25,156,250 shares of our common stock at
$12.10, for net proceeds of $289,787,000 (after underwriting discounts and
commissions).