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): December 13, 2001
CITIZENS COMMUNICATIONS COMPANY
(Exact name of Registrant as specified in its charter)
Delaware 001-11001 06-0619596
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
3 High Ridge Park
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.
From May 27, 1999 through July 12, 2000, we entered into several agreements to
acquire telephone access lines. These transactions have been and will be
accounted for using the purchase method of accounting. The results of operations
of the acquired properties have been and will be included in our financial
statements from the dates of acquisition of each property. These agreements and
the status of each transaction are described as follows:
Verizon Acquisition
-------------------
Between May and December 1999, we announced agreements to purchase from
Verizon Communications Inc., formerly GTE Corp. (Verizon), approximately
381,200 telephone access lines (as of December 31, 2000) in Arizona,
California, Illinois/Wisconsin, Minnesota and Nebraska for approximately
$1,171.0 million in cash. During 2000, we closed on approximately 317,500
telephone access lines. We have received all necessary regulatory approvals
and expect that the acquisition of the remaining access lines in Arizona
and California will close during 2002. Our expected cash requirement to
complete the Verizon acquisitions is $222.8 million.
Qwest Acquisition - termination
-------------------------------
In June 1999, we announced agreements to purchase from Qwest approximately
556,800 telephone access lines (as of December 31, 2000) in Arizona,
Colorado, Idaho/Washington, Iowa, Minnesota, Montana, Nebraska, North
Dakota and Wyoming for approximately $1,650.0 million in cash and the
assumption of certain liabilities. On October 31, 2000, we closed on the
purchase of approximately 17,000 telephone access lines in North Dakota for
approximately $38.0 million in cash. On July 20, 2001, we notified Qwest
that we were terminating eight acquisition agreements with Qwest relating
to telephone exchanges in Arizona, Colorado, Idaho/Washington, Iowa,
Minnesota, Montana, Nebraska and Wyoming. Qwest subsequently filed a notice
of claim for arbitration in Denver, Colorado under the rules of the
American Arbitration Association with respect to the terminated acquisition
agreements. Qwest asserts that we wrongfully terminated these agreements
and is seeking approximately $64.0 million, which is the aggregate of
liquidation damages under letters of credit established in the terminated
acquisition agreements. We have filed a notice of claim in the same
arbitration proceeding, contesting Qwest's asserted claims and asserting
substantial claims against Qwest for material breaches of representations,
warranties and covenants in the terminated acquisition agreements and in
the acquisition agreement relating to North Dakota assets that we purchased
from Qwest.
Frontier Acquisition
--------------------
On June 29, 2001, we purchased from Global Crossing Ltd. (Global) 100% of
the stock of Frontier Corp.'s (Frontier) local exchange carrier
subsidiaries, 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 $3,370.0 million in cash, subject to
adjustment. The operations of Frontier are included in our financial
statements from the date of acquisition.
Divestitures
------------
On August 24, 1999, our Board of Directors approved a plan of divestiture for
our public utilities services businesses, which include gas, electric and water
and wastewater businesses. Currently, we have agreements to sell all our water
and wastewater operations and one of our electric operations. We have sold two
of our natural gas operations. These agreements and the status of each
transaction are described as follows:
Water and Wastewater
--------------------
On October 18, 1999, we announced the agreement to sell our water and
wastewater operations to American Water Works, Inc. for $745.0 million in
cash and $90.0 million of assumed debt. This transaction is expected to
close in the first quarter of 2002.
Electric
--------
On February 15, 2000, we announced that we had agreed to sell our electric
utility operations. The Arizona and Vermont electric divisions were under
contract to be sold to Cap Rock Energy Corp. (Cap Rock). The agreement with
Cap Rock was terminated on March 7, 2001. We intend to pursue the
disposition of the Vermont and Arizona electric divisions with alternative
buyers. In August 2000, the Hawaii Public Utilities Commission denied the
initial application requesting approval of the purchase of our Kauai
electric division by the Kauai Island Electric Co-op for $270.0 million in
cash including the assumption of certain liabilities. We are discussing a
reduction of the purchase price and other options. Our agreement for the
sale of this division may be terminated if regulatory approval is not
received before February 2002.
Gas
---
On July 2, 2001, we completed the sale of our Louisiana Gas operations to
Atmos Energy Corporation for $363.4 million in cash. The pre-tax gain on
the sale recognized in the third quarter was approximately $139.3 million.
In July 2001, an agreement was signed to sell the Colorado Gas division to
Kinder Morgan for $11.0 million in cash. This transaction closed on
November 30, 2001. We received approximately $8,899,000, after purchase
price adjustment.
Item 7. Financial Statements, Exhibits
(a) Financial Statements of Business Acquired.
Previously filed.
(b) Pro forma Financial Information
Pro forma Balance Sheet as of September 30, 2001 and Pro forma Income
Statements for the nine months ended September 30, 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: December 13, 2001
Proforma Financial Information
From May 27, 1999 through July 12, 2000, we entered into several agreements to
acquire telephone access lines. These transactions have been and will be
accounted for using the purchase method of accounting. The results of operations
of the acquired properties have been and will be included in our financial
statements from the dates of acquisition of each property. These agreements and
the status of each transaction are described as follows:
Verizon Acquisition
-------------------
Between May and December 1999, we announced agreements to purchase from
Verizon Communications Inc., formerly GTE Corp. (Verizon), approximately
381,200 telephone access lines (as of December 31, 2000) in Arizona,
California, Illinois/Wisconsin, Minnesota and Nebraska for approximately
$1,171.0 million in cash. During 2000, we closed on approximately 317,500
telephone access lines. We have received all necessary regulatory approvals
and expect that the acquisition of the remaining access lines in Arizona
and California will close during 2002. Our expected cash requirement to
complete the Verizon acquisitions is $222.8 million.
Qwest Acquisition - termination
-------------------------------
In June 1999, we announced agreements to purchase from Qwest approximately
556,800 telephone access lines (as of December 31, 2000) in Arizona,
Colorado, Idaho/Washington, Iowa, Minnesota, Montana, Nebraska, North
Dakota and Wyoming for approximately $1,650.0 million in cash and the
assumption of certain liabilities. On October 31, 2000, we closed on the
purchase of approximately 17,000 telephone access lines in North Dakota for
approximately $38.0 million in cash. On July 20, 2001, we notified Qwest
that we were terminating eight acquisition agreements with Qwest relating
to telephone exchanges in Arizona, Colorado, Idaho/Washington, Iowa,
Minnesota, Montana, Nebraska and Wyoming. Qwest subsequently filed a notice
of claim for arbitration in Denver, Colorado under the rules of the
American Arbitration Association with respect to the terminated acquisition
agreements. Qwest asserts that we wrongfully terminated these agreements
and is seeking approximately $64.0 million, which is the aggregate of
liquidation damages under letters of credit established in the terminated
acquisition agreements. We have filed a notice of claim in the same
arbitration proceeding, contesting Qwest's asserted claims and asserting
substantial claims against Qwest for material breaches of representations,
warranties and covenants in the terminated acquisition agreements and in
the acquisition agreement relating to North Dakota assets that we purchased
from Qwest.
Frontier Acquisition
--------------------
On June 29, 2001, we purchased from Global Crossing Ltd. (Global) 100% of
the stock of Frontier Corp.'s (Frontier) local exchange carrier
subsidiaries, 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 $3,370.0 million in cash, subject to
adjustment. The operations of Frontier are included in our financial
statements from the date of acquisition.
Divestitures
------------
On August 24, 1999, our Board of Directors approved a plan of divestiture for
our public utilities services businesses, which include gas, electric and water
and wastewater businesses. Currently, we have agreements to sell all our water
and wastewater operations and one of our electric operations. We have sold two
of our natural gas operations. These agreements and the status of each
transaction are described as follows:
Water and Wastewater
--------------------
On October 18, 1999, we announced the agreement to sell our water and
wastewater operations to American Water Works, Inc. for $745.0 million in
cash and $90.0 million of assumed debt. This transaction is expected to
close in the first quarter of 2002.
Electric
--------
On February 15, 2000, we announced that we had agreed to sell our electric
utility operations. The Arizona and Vermont electric divisions were under
contract to be sold to Cap Rock Energy Corp. (Cap Rock). The agreement with
Cap Rock was terminated on March 7, 2001. We intend to pursue the
disposition of the Vermont and Arizona electric divisions with alternative
buyers. In August 2000, the Hawaii Public Utilities Commission denied the
initial application requesting approval of the purchase of our Kauai
electric division by the Kauai Island Electric Co-op for $270.0 million in
cash including the assumption of certain liabilities. We are discussing a
reduction of the purchase price and other options. Our agreement for the
sale of this division may be terminated if regulatory approval is not
received before February 2002.
Gas
---
On July 2, 2001, we completed the sale of our Louisiana Gas operations to
Atmos Energy Corporation for $363.4 million in cash. The pre-tax gain on
the sale recognized in the third quarter was approximately $139.3 million.
In July 2001, an agreement was signed to sell the Colorado Gas division to
Kinder Morgan for $11.0 million in cash. This transaction closed on
November 30, 2001. We received approximatley $8,899,000, after purchase
price adjustment.
The GTE businesses acquired, the U S WEST North Dakota Acquisition and the
Frontier ILEC Acquisition are collectively referred to as the Acquisitions. All
of the public utilities services dispositions (including those not yet sold) are
collectively referred to as the Dispositions. The following unaudited pro forma
condensed combined statements of income information has been prepared to
illustrate the effects of the Acquisitions and related financings and the
Dispositions had these transactions been completed at the beginning of the
periods presented. Cash proceeds from the Dispositions that have not yet been
sold have been estimated using the actual contract price for properties where we
have signed a definitive contract to sell and using net book value for
properties not yet under contract. The remaining GTE businesses to be acquired
are not included as the effects are not material. The following unaudited pro
forma condensed balance sheet information as of September 30, 2001 has been
prepared assuming the Dispositions not consummated by September 30, 2001 had
been completed at that date.
We have accounted for our acquisitions using the purchase method of accounting.
We expect to achieve economies of scale with the acquired properties that will
both expedite our ability to provide an expanded menu of telecommunications
services and make those services incrementally more profitable but can provide
no assurance that such economies of scale will be realized. We expect that these
acquisitions 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.
Through the second quarter 2001, we had historically applied SFAS 71 in the
preparation of our financial statements because our incumbent local exchange
telephone properties (properties we owned prior to the 2000 and 2001
acquisitions of the Verizon, Qwest and Frontier properties) were predominantly
regulated in the past following a cost of service/rate of return approach.
Beginning in the third quarter of 2001, these properties no longer met the
criteria for application of SFAS 71 due to the continuing process of
deregulation and the introduction of competition to our existing rural local
exchange telephone properties, and our expectation that these trends will
continue for all our properties.
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 the companies been combined
at the beginning of the periods presented. If the companies had actually been
combined at the beginning of the periods presented, 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 Acquisitions 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 the Acquisitions and
the historical financial statements of Citizens Communications Company.
Citizens Communications Company and Subsidiaries
Pro Forma Balance Sheet Data
As of September 30, 2001
(unaudited)
Citizens Pro Forma for Acquisitions
Communications ------------------------------------
(Amounts in thousands) 9/30/2001 Adjustments Adjusted
-----------------------------------------------------
Cash $ 38,922 $ 1,789,336 (1) $ 1,828,258
Accounts receivable, net 339,382 - 339,382
Short-term investments 141,496 - 141,496
Other current assets 42,844 - 42,844
Assets held for sale 1,093,939 (1,093,939) (1) -
Assets of discontinued operations 743,238 (743,238) (1) -
--------------------------------- ----------------
Total current assets 2,399,821 (47,841) 2,351,980
Net property, plant & equipment 4,537,291 - 4,537,291
Goodwill 490,012 - 490,012
Customer Lists and other 195,243 - 195,243
Excess cost over net assets acquired 2,179,199 - 2,179,199
--------------------------------- ----------------
Intangibles 2,864,454 - 2,864,454
Investments 117,124 - 117,124
Deferred debits and other assets 466,441 - 466,441
--------------------------------- ----------------
Total assets $ 10,385,131 $ (47,841) $ 10,337,290
================================= ================
Long-term debt due within one year $ 155,967 $ - $ 155,967
Accounts payable and other current liabilities 516,520 147,691 (1) 664,211
Liabilities related to assets held for sale 214,090 (214,090) (1) -
Liabilities of discontinued operations 219,568 (219,568) (1) -
--------------------------------- ----------------
Total current liabilities 1,106,145 (285,967) 820,178
Deferred income taxes 408,975 - 408,975
Customer advances for construction
and contributions in aid of construction 206,332 - 206,332
Deferred credits and other liabilities 232,702 - 232,702
Equity units 460,000 - 460,000
Long-term debt 5,783,591 5,783,591
--------------------------------- ----------------
Total liabilities 8,197,745 (285,967) 7,911,778
Company Obligated Mandatorily Redeemable
Convertible Preferred Securities * 201,250 - 201,250
Common stock, $.25 par value (600,000,000 authorized shares,
280,036,000 issued shares and 292,344,000 outstanding shares) 73,086 - 73,086
Additional paid-in capital 1,936,607 - 1,936,607
Retained earnings 238,179 238,126 (1) 476,305
Accumulated other comprehensive income (loss) (59,147) - (59,147)
Treasury stock (202,589) - (202,589)
--------------------------------- ----------------
Total shareholders' equity 1,986,136 238,126 2,224,262
--------------------------------- ----------------
Total liabilities and shareholders' equity $ 10,385,131 $ (47,841) $ 10,337,290
================================= ================
*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
Pro Forma Income Statement Data
For the nine months ended September 30, 2001
(unaudited)
Elimination
Pro Forma for Acquisitions of Gas and
Citizens Frontier(2) -------------------------- Electric Total
(Amounts in thousands - except per-share amounts) Communications Acquisition Adjustments Adjusted Operations Pro Forma
---------------------------------------------------------------------------------
Revenue $ 1,791,144 $ 387,796 $ - $ 2,178,940 $ 534,501 $ 1,644,439
Operating expenses 1,140,079 203,920 - 1,343,999 457,089 886,910
Depreciation and amortization 413,734 103,686 50,615 (4) 568,035 6,592 561,443
Restructuring charge 13,002 - - 13,002 - 13,002
Acquisition assimilation expenses 17,665 - - 17,665 - 17,665
---------------------------------------------------------------------------------
Income from operations 206,664 80,190 (50,615) 236,239 70,820 165,419
Investment and other income, net 16,495 (4,990) 50,064 (6) 29,823 2,073 27,750
(31,746) (7)
Gain on sale of Louisiana gas operations 139,304 - - 139,304 - 139,304
Interest expense 258,033 37,482 145,341 (8) 410,131 26,996 383,135
(30,725) (7)
Income tax expense (benefit) 49,183 27,985 (56,238) (9) 20,930 17,120 3,810
Convertible preferred dividends 4,658 4,658 - 4,658
---------------------------------------------------------------------------------
Income (loss) from continuing operations $ 50,589 $ 9,733 $ (90,675) $ (30,353) $ 28,777 $ (59,130)
=================================================================================
Carrying cost of equity forward contracts 13,650 13,650
-------------- -----------
Income (loss) from continuing opertions
available to common shareholders $ 36,939 $ (72,780)
============== ===========
Weighted average shares outstanding -Basic 271,346 271,346
Weighted average shares outstanding -Diluted 278,287 278,287
Income (loss) from continuing operations
per basic share $ 0.14 $ (0.27)
Income (loss) from continuing operations
per diluted share $ 0.13 $ (0.27)
See Notes to Pro Forma Condensed Financial Statements.
Citizens Communications Company and Subsidiaries
Pro Forma Income Statement Data
For the year ended December 31, 2000
(unaudited)
Acquisitions (2)
-------------------------------------------------
GTE Pro Forma for Acquisitions
Citizens Frontier GTE Nebraska and Qwest --------------------------
Communications Acquisition Minnesota Illinois North Dakota Adjustments Adjusted
-------------------------------------------------------------------------------- -----------
(Amounts in thousands, except
per-share amounts)
Revenue $ 1,802,358 $ 746,302 $ 56,962 $ 77,570 $ 10,632 $ - $ 2,693,824
Operating expenses 1,292,950 370,893 23,323 27,494 3,058 9,000 (3) 1,726,718
Depreciation and amortization 387,607 200,669 545 17,087 2,270 126,581 (4) 747,285
12,526 (5)
--------------------------------------------------------------------------- -------------
Income from operations 121,801 174,740 33,094 32,989 5,304 (148,107) 219,821
Investment and other income, net 3,350 64,583 - - - (26,323) (6) 28,856
(12,754) (7)
Minority interest 12,222 - - - - - 12,222
Interest expense 187,366 24,067 1,686 1,716 - 301,055 (8) 501,250
(14,640) (7)
Convertible preferred dividends 6,210 - - - - - 6,210
--------------------------------------------------------------------------- -------------
Pre-tax income (56,203) 215,256 31,408 31,273 5,304 (473,599) (246,561)
Income tax expense (benefit) (16,132) 103,417 12,687 12,393 2,007 (199,434) (9) (85,062)
--------------------------------------------------------------------------- -------------
Income (loss) from continuing
operations $ (40,071) $ 111,839 $ 18,721 $ 18,880 $ 3,297 $ (274,165) $ (161,499)
=========================================================================== =============
Weighted average shares outstanding:
Basic 261,744 25,156 (10)
Diluted 266,931 25,156 (10)
Loss from continuing operations per
share:
Basic $ (0.15)
Diluted $ (0.15)
Elimination of
Gas and Electric Total
Operations Proforma
---------------------------
(Amounts in thousands, except
per-share amounts)
Revenue $ 597,823 $ 2,096,001
Operating expenses 526,472 1,200,246
Depreciation and amortization 47,857 699,428
--------------------------
Income from operations 23,494 196,327
Investment and other income, net 5,073 23,783
Minority interest - 12,222
Interest expense 36,056 465,194
Convertible preferred dividends - 6,210
---------------------------
Pre-tax income (7,489) (239,072)
Income tax expense (benefit) (2,417) (82,645)
---------------------------
Income (loss) from continuing
operations $ (5,072) $ (156,427)
===========================
Weighted average shares outstanding:
Basic 286,900
Diluted 292,087
Loss from continuing operations per
share:
Basic $ (0.55)
Diluted $ (0.55)
See Notes to Pro Forma Condensed Financial Statements.
Notes to Pro Forma Condensed Financial Statements
(1) Reflects the effect of the probable sale of our public utilities services
properties, including adjustments for the estimated income taxes due on the
estimated gain. The adjustment to shareholders' equity represents an
increase to retained earnings representing the estimated after tax gain on
the sale.
(2) The columns reflecting the historical results of operations for Frontier,
GTE Minnesota, GTE Nebraska and Illinois and Qwest North Dakota represent
historical results prior to their acquisition by Citizens. The results
after the acquisitions by Citizens are included in Citizens' historical
results.
(3) Represents an increase in selling, general and administrative expenses of
the GTE Combined Entities to reverse a pension credit recorded during the
year ended December 31, 2000 that will not continue.
(4) For purposes of the accompanying pro forma combined financial statements,
we have reflected the assets to be 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 have undertaken 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.
In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS
141, "Business Combinations." This statement requires that all business
combinations be accounted for under the purchase method of accounting for
business combinations initiated after June 30, 2001 and prohibits the use
of the pooling-of-interests method of accounting. All acquisitions
presented in these pro forma financial statements have been accounted for
using the purchase method.
In July 2001, the FASB issued SFAS 142, "Goodwill and Other Intangible
Assets." this statement requires that goodwill no longer be amortized to
earnings, but instead be reviewed for impairment. Impairment tests are
required to be performed at least annually. The amortization of goodwill
ceases upon adoption of the statement. The statement is effective for
fiscal years beginning after December 15, 2001 for companies whose annual
reporting period ends on December 31, 2001 and applies to all goodwill and
other intangible assets recognized in the statement of financial position
at that date, regardless of when the assets were initially recognized. We
will cease to recognize amortization of the goodwill portion of intangibles
starting January 1, 2002. Pro forma amortization of intangibles for the
nine months ended September 30, 2001 and the year ended December 31, 2000
was $128.9 million and $144.3 million, respectively. We will be required to
test for impairment of goodwill annually starting January 1, 2002. The
amount of any future impairment, if any, cannot be estimated at this time.
The following table details the amortization adjustment for the year ended
December 31, 2000 and the nine months ended September 30, 2001:
($ in thousands) For the year For the nine
ended months ended
December 31, 2000 September 30, 2001
----------------- -------------
Frontier $ 61,230 $ 30,615
Frontier adjustments 40,000 20,000
Acquired GTE Properties 25,351 -
----------------- -------------
Properties acquired prior to
June 30, 2001 126,581 50,615
================= =============
Excess of cost over net assets acquired for the Acquisitions is being
amortized using the straight-line method over a 15 year period for
properties acquired prior to June 30, 2001. The adjustments for the
Frontier ILEC and the Acquired GTE businesses in the table above reflect
this amortization. Should the allocation of such excess of cost over
historical net assets acquired differ significantly from that described
above as well as our initial allocation for properties recently purchased,
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 the fair market
value at the date of the acquisition. Frontier was amortizing the
associated goodwill over a 25-year period. We included amortization of
goodwill over a 15-year period for the full year 2000 and the nine months
ended September 30, 2001 to conform with our policy. The "Frontier
adjustments" of $40,000,000 and $20,000,000 for the year ended December 31,
2000 and the nine months ended September 30, 2001, respectively, are
reflected in the table above.
(5) Represents an adjustment for depreciation expense related to GTE Minnesota
since the GTE historical financial statements did not include depreciation
related to these assets classified as held for sale.
(6) Represents the reversal of a foreign exchange gain of $21,900,000 for the
year ended December 31, 2000 and the reversal of a foreign exchange loss of
$50,064,000 for the nine months ended September 30, 2001 recorded by
Frontier related to a note receivable due from an affiliate. Such note is
not part of the assets acquired by Citizens.
The pro forma income statement for the year ended December 31, 2000 also
includes an adjustment to eliminate $4,423,000 of our investment income
related to our bond portfolio sold during 2000 to partially fund the
Acquisitions.
(7) Represents the elimination of intercompany interest income recorded by
Frontier related to a note receivable due from an affiliate of Frontier and
interest expense recorded by Frontier related to a loan facility used to
fund this note receivable. Such note and loan facility are not part of the
assets and liabilities acquired by Citizens.
(8) Represents the increase in interest expense assuming the permanent
financings as described below were utilized at the beginning of the periods
presented to partially fund the Acquisitions. 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. On June 13, 2001, we issued 18,400,000
equity units at $25 per unit for gross proceeds of $460,000,000. Each
equity unit consists of a 6 3/4 % senior note due 2006 and a purchase
contract for our common stock. On August 13, 2001, we issued an aggregate
of $1.75 billion of notes consisting of $300 million principal amount of
6.375% notes due August 15, 2004, $750 million principal amount of 7.625%
notes due August 15, 2008 and $700 million principal amount of 9.0 % notes
due August 15, 2031.
(9) Represents adjustments to income taxes based on income before income taxes
using the applicable incremental income tax rate.
(10) 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).