CITIZENS 401(k) SAVINGS PLAN
Financial Statements and Schedules
December 31, 2000 and 1999
(With Independent Auditors' Report Thereon)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2000
Commission file number 001-11001
CITIZENS 401(k) SAVINGS PLAN
CITIZENS COMMUNICATIONS COMPANY
A Delaware Corporation
IRS Employer Identification Number 06-0619596
3 High Ridge Park
P.O. Box 3801
Stamford, CT 06905
Telephone (203) 614-5600
CITIZENS 401(k) SAVINGS PLAN
Table of Contents
Page
Independent Auditors' Report 1
Financial Statements:
Statements of Net Assets Available for Benefits -
December 31, 2000 and 1999 2
Statement of Changes in Net Assets Available for Benefits
For the Year Ended December 31, 2000 3
Notes to Financial Statements 4-9
Supplemental Schedules:*
Schedule H, Line 4i - Schedule of Assets (Held at End of Year) 10
Schedule H, Line 4j - Schedule of Reportable Transactions for the Year Ended December 31, 2000 11
Schedule H, Line 4d - Schedule of Non-exempt Transactions 12
Signature 13
* Schedules required by Form 5500 that are not applicable have not been
included.
Independent Auditors' Report
Citizens Communications Company, Plan Administrator of the
Citizens 401(k) Savings Plan:
We have audited the accompanying statements of net assets available for benefits
of the Citizens 401(k) Savings Plan (the Plan) as of December 31, 2000 and 1999,
and the related statement of changes in net assets available for benefits for
the year ended December 31, 2000. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2000 and 1999 and the changes in net assets available for benefits
for the year ended December 31, 2000 in conformity with accounting principles
generally accepted in the United States of America.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets held
at end of year, schedule of reportable transactions, and schedule of non-exempt
transactions are presented for the purposes of additional analysis and are not a
required part of the basic financial statements but are supplementary
information required by the Department of Labor Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. These supplemental schedules are the responsibility of the Plan's
management. These supplemental schedules have been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, are fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
June 27, 2001
CITIZENS 401(k) SAVINGS PLAN
Statements of Net Assets Available for Benefits
December 31, 2000 and 1999
2000 1999
------------------ ------------------
Assets:
Investments:
Citizens Communications Company common stock $ 100,520,640 $ 109,531,071
Mutual funds 42,300,003 46,072,312
Collective trusts 75,179,396 83,182,993
Guaranteed investment contacts 13,167,635 16,665,355
Participants' loans 7,941,462 7,232,903
------------------ ------------------
Total investments 239,109,136 262,684,634
Employer's contribution receivable 28,275 ---
Participants' contributions receivable 97,033 ---
------------------ ------------------
Net assets available for benefits $ 239,234,444 $ 262,684,634
================== ==================
See accompanying notes to financial statements.
-2-
CITIZENS 401(k) SAVINGS PLAN
Statement of Changes in Net Assets Available for Benefits
Year ended December 31, 2000
Additions to net assets attributed to:
Investment income:
Dividends $ 8,003,468
Interest 593,262
Net depreciation in fair value of investments (37,108,649)
------------------
(28,511,919)
Contributions:
Participants' contributions 20,015,231
Employer contributions 6,030,560
------------------
26,045,791
Total additions, net (2,466,128)
------------------
Deductions to net assets attributed to:
Benefits paid to participants (20,972,940)
Miscellaneous expenses (11,122)
------------------
Total deductions (20,984,062)
------------------
Net decrease in assets available for benefits (23,450,190)
Net assets available for benefits:
Beginning of year 262,684,634
------------------
End of year $ 239,234,444
==================
See accompanying notes to financial statements.
-3-
CITIZENS 401(k) SAVINGS PLAN
Notes to Financial Statements
(1) Description of the Plan
The following brief description of the Citizens 401(k) Savings Plan
(the "Plan") provides general information. Participants should refer
to the Plan document for a more comprehensive description of the
Plan's provisions.
(a) Background
The Plan is a voluntary defined contribution plan sponsored by
Citizens Communications Company (the "Company"). Under the terms
of the Plan, bargaining or nonbargaining unit employees who have
attained six months of continuous service are eligible to
participate in the Plan. At December 31, 2000 there were 7,043
employees eligible to participate in the Plan and 4,925 active
employees participating in the Plan.
On October 31, 1997, the Company purchased The Gas Company
("GASCO"). Effective September 30, 1999, the Plan merged with the
GASCO Bargaining 401(k) Plan ("GASCO Union Plan"). The GASCO
Union Plan was a defined contribution plan for the benefit of
employees covered by collective bargaining agreements with GASCO.
On October 1, 1999, $1,475,186 was transferred into the Plan
related to this Plan merger. The Plan administrator believes the
Plan merger was a tax-exempt transaction under the applicable
provision of the Internal Revenue Code ("IRC") and, therefore, is
not subject to Federal income tax.
(b) Contributions
Eligible employees may contribute, in 1% increments, up to 16% of
their annual compensation through payroll deductions, subject to
certain maximum contribution restrictions. Prior to January 1,
1992, participants had an option to elect life insurance coverage
as an investment vehicle. Beginning January 1, 1992, such option
was discontinued, except that participants who elected life
insurance coverage prior to January 1, 1992 could continue to
make specific dollar allocations to purchase additional life
insurance coverage. Contributions may be apportioned in 5%
increments to any combination of the seven investment options
specified below. Participants may change salary deferral
percentages and investment options daily, by telephone, which
generally become effective with the first payroll of the
following month. At December 31, 2000, the number of accounts in
each fund were as follows:
Number of
accounts
------------
Stock Fund 5,449
PIMCO Total Return Fund 2,311
Putnam OTC & Emerging Growth Fund 3,309
Putnam Stable Value Fund 2,591
Putnam S & P 500 Index Fund 4,273
Putnam International Growth Fund 2,576
Putnam Vista Fund 857
Life Insurance 31
-4-
CITIZENS 401(k) SAVINGS PLAN
Notes to Financial Statements (continued)
The Company contribution is determined for each Plan year by the
Board of Directors of the Company. The Company contribution for
the 2000 Plan year amounted to 50% of the first 6% of each
Participant's annual base compensation (as defined by the Plan)
that a participant contributes to the Plan for participants not
covered by collective bargaining agreements. Company
contributions for participants covered by collective bargaining
agreements were made in accordance with the terms of the
respective agreement. The Company contributions are invested
entirely in the Stock Fund unless a participant is age 55 or
older in which case the participant could elect to have the
Company contribution invested proportionately in the same
investments as his/her own contributions. In addition, at age 55
a participant can request to transfer previous Company
contributions invested in the Stock Fund to other investment
options.
(c) Participant Accounts
Each participant's account is credited with the participant's
contribution and an allocation of the Company contribution and
plan earnings or losses. Allocations are based on each
participant's contribution, as defined. The benefit to which a
participant is entitled is the amount, which can be provided from
the participant's account.
(d) Vesting
Participants are at all times fully vested in their own
contributions and the allocated earnings thereon. Participants
become 100% vested in the Company contributions and the related
earnings on the Company contributions upon disability, death,
attainment of normal retirement age or after five years of
service. For any other termination of employment, the vesting
schedule is as follows:
Vested percentage
of company contribution
Years of service and related earnings
-------------------------- --------------------------
Less than 2 years 0%
2 years but less than 3 years 40%
3 years but less than 4 years 60%
4 years but less than 5 years 80%
5 years or more 100%
-5-
CITIZENS 401(k) SAVINGS PLAN
Notes to Financial Statements (continued)
(e) Participant Loans
Participants in the Plan may request to borrow up to the lesser
of 50% of his/her vested account balance or $50,000. The loans
are allocated to a Loan Fund. The interest rate paid by the
participant is equal to the prime interest rate in effect at the
beginning of the month in which the loan is processed and remains
fixed at that rate for the term of the loan. Loan repayments are
made through payroll deductions, after tax, and are credited to
each Participant's account as the payments are made. A
participant may repay a loan in full at anytime by remitting
his/her payoff check directly to Putnam Investments ("Putnam"),
the trustee of the Plan. In the event of termination of
employment, a Participant's loan may be repaid in full or the
loan will be canceled and the Participant's final distribution
will be reduced by the amount of the outstanding loan balance.
There were 1,109 Participants in the loan fund at December 31,
2000.
(f) Payment of Benefits
Distribution of benefits must begin either on or before April 1st
of the year following the year the participant attains age 70
1/2. If the Participant is still employed by the Company at age
70 1/2 , he/she must take a minimum distribution of his/her
balance on or before April 1st of the calendar year after the
participant attains age 70 1/2.
Upon termination of employment, a Participant is entitled to
receive payment in full of the vested portion of his/her account.
If the value of the terminating Participant's vested account
balance exceeds $5,000, the Participant may elect to defer
his/her distribution
(g) Forfeitures
For the year ended December 31, 2000, forfeited nonvested Company
contributions totaled $439,388. These amounts were used to reduce
the obligation of the Company to make contributions to the Plan.
(h) Administrative Costs
The majority of Plan administration costs are paid by the
Company.
(2) Summary of Accounting Policies
(a) Basis of Accounting
The financial statements of the Plan are prepared under the
accrual method of accounting.
In September 1999, the American Institute of Certified Public
Accountants issued Statement of Position 99-3 "Accounting For and
Reporting on Certain Deferred Contribution Plan Investments and
Other Disclosure Matters" (SOP 99-3). SOP 99-3 simplifies
disclosure for certain investments and is effective for plan
years ended after December 15, 1999. The Plan adopted SOP 99-3
and as a result, information no longer required to be disclosed
about participant fund investment programs is not presented in
the Plan's financial statements.
-6-
CITIZENS 401(k) SAVINGS PLAN
Notes to Financial Statements (continued)
(b) Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amount of assets, liabilities, changes
therein, and disclosures of contingent assets and liabilities at
the date of the financial statements. Actual results could differ
from these estimates.
(c) Investments
The Plan's investments are stated at fair value, except for
Guaranteed Investment Contracts, which are valued at contract
value as they are benefit responsive contracts. The average yield
on the Guaranteed Investment Contracts is 6.8% for the year ended
December 31, 2000. Shares of registered investment companies
(mutual funds) are valued at quoted market prices, which
represent the net asset value of shares held by the Plan. The
Company stock is valued at its quoted market price. Participant
notes receivable are valued at cost, which approximates fair
value. The net depreciation/appreciation in the fair value of
investments consists of the net realized gains and losses on the
disposal of investments and the unrealized
appreciation/depreciation of the market value for the investments
remaining in the Plan in 2000.
Purchases and sales of securities are recorded on a trade-date
basis. Interest income is recorded on the accrual basis.
Dividends are recorded on the ex-dividend date.
(d) Benefits
Benefits are recorded when paid.
(e) Risks and Uncertainties
Investment securities are exposed to various risks such as
interest rate, market and credit. Due to uncertainties inherent
in the estimates and assumptions process and in the value of
investment securities, it is at least reasonably possible that
changes in these estimates, and risk factors in the near term
could be material to the financial statements.
(f) New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS No. 133"). SFAS No. 133 requires that an
entity recognize all derivatives and measure those instruments at
fair value. SFAS No. 133 is effective January 1, 2001. Management
has determined that the impact of SFAS No. 133 on the Plan
financial statements is immaterial.
-7-
CITIZENS 401(k) SAVINGS PLAN
Notes to Financial Statements (continued)
(3) Investment
The following presents investments that represent 5% or more of
the Plan's net assets:
2000 1999
-------------- ----------------
Citizens Communications Company common stock:
Participant Directed, 4,249,893 and 4,461,743 shares,
respectively $ 55,779,844 $ 63,298,404
Non-participant Directed, 3,408,822 and 3,258,823
shares, respectively 44,740,796 46,232,667
Putnam OTC & Emerging Growth Fund 15,733,252 25,302,536
Putnam International Growth Fund 12,413,885 --
Putnam Stable Value Fund 16,137,246 13,953,270
Putnam S&P 500 Index Fund 59,042,150 69,229,723
During 2000, the Plan's investments (including gains and losses on
investments bought and sold as well as held during the year) depreciated
in value by $37,108,649 as follows:
Common stock of the Company $ (8,041,481)
Mutual funds (22,822,638)
Collective trusts (6,244,530)
-------------------
$ (37,108,649)
===================
(4) Non Participant -Directed Investments
Information about the net assets available for benefits and
significant components of the changes in net assets available for
benefits relating to the non-participant directed investments are as
follows:
2000 1999
---------------- -----------------
Net assets:
Common Stock of the Company $ 44,740,796 46,232,667
Changes in net assets:
Net (depreciation) appreciation in fair value of
investments (3,848,246) 20,087,532
Employer contributions 6,030,560 5,929,777
Benefits paid to participants (2,959,090) (3,249,454)
Other (715,095) (779,985)
---------------- -----------------
Change in net assets $ (1,491,871) 21,987,870
================ =================
-8-
CITIZENS 401(k) SAVINGS PLAN
Notes to Financial Statements (continued)
(5) Related Party Transactions
Certain Plan assets are invested in shares of mutual funds that are
managed by Putnam. As Putnam is the trustee as defined by the Plan,
these transactions qualify as party-in-interest transactions. Fees
paid by the Company to Putnam for investment management services
amounted to $113,791 in 2000. Fees paid by the Plan to Putnam for
administrative services in 2000 amounted to $11,122.
(6) Termination of Plan
The Company's Board of Directors has the right under the terms of the
Plan to discontinue Company contributions at any time and may
terminate the Plan, subject to the terms of the Employee Retirement
Income Security Act of 1974 ("ERISA").
(7) Tax Status
As of January 2, 1998, the assets of the Citizens Utilities 401(k)
Savings Plan were transferred into the CUC 401(k) Employee Benefit
Plan. The name of the CUC 401(k) Employee Benefit Plan was then
changed to Citizens 401(k) Savings Plan. Both the Citizens Utilities
401(k) Savings Plan and the CUC 401(k) Employee Benefit Plan received
determination letters from the Internal Revenue Service dated January
25, 1995 and October 26, 1994, respectively, stating that the plans
were qualified under Section 401(a) of the Internal Revenue Code (the
"Code") and the related trusts were tax exempt under Section 501(a) of
the Code. The Company has not yet applied for a determination letter
for the Citizens 401(k) Savings Plan, however, the Company intends to
file and fully expects the plan to qualify under Section 401(a) of the
Code and the related trusts to be tax exempt under Section 501(a) of
the Code. The Plan Administrator and the Plan's tax counsel believe
that the Plan is currently designed and being operated in compliance
with the Code.
-9-
CITIZENS 401(k) SAVINGS PLAN
Scheudle H, line 4i - Schedule of Assets (held at end of year)
December 31, 2000
(b) Identity of issuer, borrowers, (e) Current
(a) lessor, or similar party (c) Description of Investment (d) Cost value
--- ---------------------------------- ----------------------------------------------- ------------ --------------
* Citizens Communications Company Citizens Communications Company common stock
shares - 7,658,715 N/A $ 100,520,640
* PIMCO Investments PIMCO Total Return Fund - Mutual Fund
shares - 1,034,218 N/A 10,745,524
* Putnam Investments Putnam OTC and Emerging Growth Fund
Mutual Fund - shares - 1,130,762 N/A 15,733,252
* Putnam Investments Putnam International Growth Fund
Mutual Fund - shares - 502,383 N/A 12,413,885
* Putnam Investments Putnam Vista Fund
Mutual Fund - shares - 261,701 N/A 3,407,342
* Putnam Investments Putnam S&P 500 Index Fund - Collective Trust
shares - 1,863,704 N/A 59,042,150
* Putnam Investments Putnam Stable Value Fund - Collective Trust
shares - 16,137,246 N/A 16,137,246
Guaranteed investment contracts:
Connecticut General Life Insurance Company - maturity date 6/30/01; rate 7.14% $ 2,706,888 $ 2,706,888
Connecticut General Life Insurance Company - maturity date 6/30/01; rate 7.14% 542,038 542,038
GE Life & Annuity Assurance Company - maturity date 6/30/01; rate 6.11% 3,194,769 3,194,769
Principal Mutual Life Insurance Company - maturity date 6/29/02; rate 7.16% 1,370,542 1,370,542
Principal Mutual Life Insurance Company - maturity date 6/29/02; rate 7.16% 740,422 740,422
Travelers Life and Annuity - maturity date 3/31/03; rate 6.81% 3,732,708 3,732,708
Travelers Life and Annuity - maturity date 3/31/03; rate 6.81% 880,268 880,268
--------------
Total guaranteed investment contracts $ 13,167,635
--------------
* Plan participants 1,109 loans - interest rate from 6% to 9% $ 7,941,462
* Party -in-interest as defined by ERISA
See independent auditors' report.
-10-
CITIZENS 401(k) SAVINGS PLAN
Schedule H, line 4j - Schedule of Reportable Transactions
Year ended December 31, 2000
Series of transactions with respect to securities of the same issue aggregating
over 5% of the current value of plan assets at the beginning of the year:
(h) Current
value of
asset on
(c) Purchase (d) Selling (g) Cost of transaction
(a) Identity of party involved (b) Description of Asset price price asset date (i) Net gain
------------------------------ ------------------------ ------------ ----------- ----------- ------------- ------------
Citizens Communications Citizens Communications
Company Company common stock $ 5,587,558 5,587,558 5,587,558 ---
Citizens Communications Citizens Communications
Company Company common stock $ 2,959,090 2,121,730 2,959,090 837,360
See independent auditors' report.
-11-
CITIZENS 401(k) SAVINGS PLAN
Schedule H, line 4d - Schedule of Nonexempt Transactions
Year ended December 31, 2000
Relationship Description Value of
Identity of party involved to Plan of transaction transaction
------------------------------------------------ ------------------------ ------------------------------ -------------
Citizens Communications Company Plan sponsor Late deposit of employees
contributions - 13 days $ 8,220
See independent auditors' report.
-12-
CITIZENS 401(k) SAVINGS PLAN
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan
Administrators have duly caused this annual report to be signed on its behalf by
the undersigned hereunto duly authorized.
CITIZENS 401(k) SAVINGS PLAN
/s/ Robert J. Larson
-------------------------------------------
Robert J. Larson
Vice President and Chief Accounting Officer
Date: June 27, 2001
-13-
Independent Auditors' Consent
-----------------------------
The Board of Directors
Citizens Communications Company:
We consent to incorporation by reference in the Registration Statement (No.
33-48683) on Form S-8, and in the Registration Statement (No. 333-61432) on Form
S-8 of Citizens Communications Company of our report dated June 27, 2001, with
respect to the Statements of Net Assets Available for Benefits of the Citizens
401(k) Savings Plan as of December 31, 2000 and 1999, and the related Statement
of Changes in Net Assets Available for Benefits for the year ended December 31,
2000, and supplemental schedules as of and for the year ended December 31, 2000,
which report appears in the annual report on Form 11-K of the Citizens 401(k)
Savings Plan dated December 31, 2000.
/s/ KPMG LLP
------------
New York, New York
June 27, 2001