AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 15, 2002
REGISTRATION NO. 333-69740
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CITIZENS COMMUNICATIONS COMPANY
(Exact name of registrant as specified in charter)
DELAWARE 06-0619596
(State or other jurisdiction of (I.R.S. employer identification number)
incorporation or organization)
3 HIGH RIDGE PARK, STAMFORD, CONNECTICUT 06905 (203) 614-5600
(Address, including, zip code, and telephone number, including area code, of
registrant's principal executive offices)
SCOTT N. SCHNEIDER
VICE CHAIRMAN OF THE BOARD AND
EXECUTIVE VICE PRESIDENT
CITIZENS COMMUNICATIONS COMPANY
3 HIGH RIDGE PARK
STAMFORD, CONNECTICUT 06905
TEL. NO. (203) 614-5600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES TO:
DAVID F. KROENLEIN, ESQ. VINCENT PAGANO, JR., ESQ.
WINSTON & STRAWN SIMPSON THACHER & BARTLETT
200 PARK AVENUE 425 LEXINGTON AVENUE
NEW YORK, NY 10166 NEW YORK, NEW YORK 10017-3954
(212) 294-2645 (212) 455-2000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effectiveness of this registration statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(b)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES, IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JANUARY 15, 2002
PRELIMINARY PROSPECTUS
[LOGO]
$1,750,000,000
OFFER TO EXCHANGE ALL OUTSTANDING
6.375% SENIOR NOTES DUE 2004 ($300,000,000 AGGREGATE PRINCIPAL AMOUNT
OUTSTANDING)
FOR 6.375% SENIOR NOTES DUE 2004
7.625% SENIOR NOTES DUE 2008 ($750,000,000 AGGREGATE PRINCIPAL AMOUNT
OUTSTANDING)
FOR 7.625% SENIOR NOTES DUE 2008
9.00% SENIOR NOTES DUE 2031 ($700,000,000 AGGREGATE PRINCIPAL AMOUNT
OUTSTANDING)
FOR 9.00% SENIOR NOTES DUE 2031
EACH REGISTERED UNDER THE SECURITIES ACT OF 1933
- The exchange offer expires at 5:00 p.m., New York City time, on
, 2002, unless extended.
- The exchange offer is not subject to any conditions other than that the
exchange offer will not violate any applicable law or interpretation of
the staff of the SEC and that there be no pending or threatened proceeding
that would reasonably be expected to impair our ability to proceed with
the exchange offer.
- All outstanding notes that are validly tendered and not validly withdrawn
will be exchanged.
- Tenders of outstanding notes may be withdrawn at any time before
5:00 p.m. on the expiration date of the exchange offer.
- The exchange of notes will not be a taxable exchange for U.S. federal
income tax purposes.
- We will not receive any proceeds from the exchange offer.
- The new notes will not be listed or quoted on any securities exchange.
- The terms of the new notes to be issued are substantially identical to the
outstanding notes, except for transfer restrictions and registration
rights relating to the outstanding notes.
CONSIDER CAREFULLY THE "RISK FACTORS" BEGINNING ON PAGE 10.
Each broker-dealer that receives notes for its own account in the exchange
offer must acknowledge that it will deliver a prospectus in connection with any
resale of those notes. The letter of transmittal states that, by so
acknowledging and delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of new notes received in exchange
for outstanding notes where the outstanding notes were acquired by the
broker-dealer as a result of market-making activities or other trading
activities. We have agreed that, for a period of 90 days after the consummation
of the exchange offer, we will make this prospectus available to any broker-
dealer for use in connection with resales of new notes.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE NEW NOTES TO BE DISTRIBUTED IN THE
EXCHANGE OFFER OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is , 2002.
TABLE OF CONTENTS
PAGE
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Summary..................................................... 3
Risk Factors................................................ 10
Provision of Information.................................... 17
Forward-Looking Statements.................................. 17
Use of Proceeds............................................. 18
Selected Consolidated Financial Data........................ 19
Ratio of Earnings to Fixed Charges.......................... 20
The Exchange Offer.......................................... 21
Description of the New Notes................................ 32
Material United States Federal Income Tax Considerations.... 43
Plan of Distribution........................................ 44
Legal Matters............................................... 44
Experts..................................................... 44
Where You Can Find More Information......................... 45
Incorporation by Reference.................................. 45
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This prospectus incorporates important business and financial information
about Citizens Communications Company that is not included in or delivered with
this prospectus. See "Incorporation by Reference." This information is available
without charge to holders of our outstanding notes upon written or oral request
to:
Citizens Communications Company
3 High Ridge Park, Stamford, Connecticut 06905
Attn.: Office of the Secretary
Telephone 203-614-5600
HOLDERS OF OUR OUTSTANDING NOTES MUST REQUEST THE INFORMATION NO LATER THAN
FIVE BUSINESS DAYS BEFORE , 2002 TO OBTAIN TIMELY DELIVERY.
2
SUMMARY
THIS SUMMARY HIGHLIGHTS ONLY SELECTED INFORMATION FROM THIS PROSPECTUS AND
MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO BETTER
UNDERSTAND THE EXCHANGE OFFER, YOU SHOULD READ THIS ENTIRE PROSPECTUS AND THE
ADDITIONAL DOCUMENTS TO WHICH WE REFER YOU. SEE "WHERE YOU CAN FIND MORE
INFORMATION" AND "INCORPORATION BY REFERENCE."
Citizens Communications Company is a Delaware corporation. Our principal
executive offices are located at 3 High Ridge Park, Stamford, Connecticut 06905,
and our telephone number at that address is (203) 614-5600. Our world wide web
site address is HTTP://WWW.CZN.COM. The information in our website is not part
of this prospectus.
In this prospectus, references to "Citizens" are to Citizens Communications
Company and do not include its subsidiaries. References to the "Company," "we,"
"us" and "our" are to Citizens Communications Company and do include its
subsidiaries. References to the "notes" are to the 6.375% senior notes due 2004,
the 7.625% senior notes due 2008 and the 9.00% senior notes due 2031.
THE EXCHANGE OFFER
On August 16, 2001, we completed the private offering of the "initial"
notes, comprised of $300,000,000 principal amount of 6.375% Senior Notes Due
2004, $750,000,000 principal amount of 7.625% Senior Notes Due 2008 and
$700,000,000 principal amount of 9.00% Senior Notes due 2031. In connection with
the private offering, we entered into an exchange and registration rights
agreement with the initial purchasers in the private offering in which we
agreed, among other things, to deliver to you this prospectus and to use
reasonable efforts to complete the exchange offer no later than February 12,
2002.
In the exchange offer, you are entitled to exchange your initial notes for
"new" notes--registered notes with substantially identical terms as the initial
notes, except for transfer restrictions and registration rights relating to the
initial notes. If we do not complete the exchange offer by February 12, 2002,
the per annum interest rate on the initial notes will be increased by
one-quarter of one percentage point. Currently, $1,750,000,000 principal amount
of initial notes are outstanding.
We believe that the new notes issued in the exchange offer may be resold by
you without compliance with the registration and prospectus delivery provisions
of the Securities Act of 1933, subject to the exchange offer.
CITIZENS COMMUNICATIONS COMPANY
We are a telecommunications-focused company providing wireline
communications services primarily to rural areas and small and medium-sized
towns and cities as an incumbent local exchange carrier, or ILEC. In addition,
we provide competitive local exchange carrier, or CLEC, service to business
customers and to other communications carriers in certain metropolitan areas in
the western United States through Electric Lightwave, Inc., or ELI, our
85%-owned subsidiary. ELI is a publicly-traded company that we control with 96%
of the vote through a class of common stock that has 10 votes for each vote of
the publicly-traded common stock. We also provide public utility services
including water distribution and wastewater treatment, natural gas transmission
and distribution and electric transmission and distribution services to
primarily rural and suburban customers throughout the United States.
With approximately 2.5 million telephone access lines in 24 states we were
the seventh largest local access wireline telephone provider in the United
States as of September 30, 2001. We also have agreements to purchase an
additional 63,700 local access lines. In fiscal years 1999 and 2000, revenues
from our ILEC services segment were $903.2 million and $963.7 million,
respectively. Revenues in fiscal
3
years 1999 and 2000, from our CLEC services segment were $187.0 million and
$244.0 million, respectively.
In 1999, we announced plans to divest our public utilities services
segments. Consistent with this effort, we have sold or contracted to sell our
water and wastewater utility services segments and portions of our gas and
electric properties and are presently engaged in the sale of, or are seeking
buyers for, our remaining gas and electric utility services segments. Pending
these divestitures, we continue to provide gas and electric utility services and
water and wastewater services.
TERMS OF THE EXCHANGE OFFER
The exchange offer relates to the exchange of up to $1,750,000,000 aggregate
principal amount of initial notes for an equal aggregate principal amount of new
notes. The new notes will be obligations of Citizens and will be governed by the
same indenture that governs the initial notes. The form and terms of the new
notes are substantially identical to the form and terms of the initial notes
except that the issuance of the new notes have been registered under the
Securities Act, and therefore are not entitled to the benefits of the exchange
and registration rights agreement that was executed as part of the private
offering of the initial notes. The exchange and registration rights agreement
provides for registration rights with respect to the initial notes and for the
payment of additional interest on the initial notes if we fail to meet our
registration obligations under that agreement.
Initial Notes............................. $300,000,000 aggregate principal amount of 6.375% Senior
Notes Due 2004, $750,000,000 aggregate principal amount
of 7.625% Senior Notes Due 2008, and $700,000,000
aggregate principal amount of 9.00% Senior Notes Due
2031, each of which were issued on August 16, 2001.
New Notes................................. $300,000,000 aggregate principal amount of 6.375% Senior
Notes Due 2004, $750,000,000 aggregate principal amount
of 7.625% Senior Notes Due 2008, and $700,000,000
aggregate principal amount of 9.00% Senior Notes Due
2031, each of which we are offering hereby. The initial
notes and the new notes are referred to collectively as
the notes.
The Exchange Offer........................ We are offering to exchange $1,000 principal amount of
new notes for each $1,000 principal amount of initial
notes. Initial notes may only be exchanged in $1,000
principal amount increments. As of the date of this
prospectus, there are outstanding $1,750,000,000
aggregate principal amount of initial notes. To be
exchanged, the initial notes must be properly tendered
and accepted. All outstanding initial notes that are
properly tendered and not validly withdrawn will be
exchanged for new notes issued on or promptly after the
expiration date of the exchange offer.
Resales................................... Based on an interpretation by the Securities and
Exchange Commission set forth in no-action letters
issued to third parties, we believe that you may resell
or otherwise transfer new notes issued in the exchange
offer without complying with
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the registration and prospectus delivery requirements of
the Securities Act, provided that:
- you are not our "affiliate" within the meaning of Rule
405 under the Securities Act;
- you are not a broker-dealer who acquired the initial
notes directly from us without compliance with the
registration and prospectus delivery provisions of the
Securities Act;
- you acquire the new notes in the ordinary course of
your business; and
- you are not participating in, do not intend to
participate in, and have no arrangement or
understanding with any person to participate in the
distribution of the new notes.
If you are a broker-dealer and receive new notes for
your own account in the exchange offer in exchange for
initial notes that were acquired as a result of
market-making or other trading activities, you must
acknowledge that you will deliver a prospectus in
connection with any resale of the new notes.
Consequences of Failure to
Exchange................................ If you do not exchange your initial notes for the new
notes in the exchange offer, you will still be subject
to the restrictions on transfer of your initial notes
and we will not have any further obligation to the
holders of those initial notes to provide for the
registration of the initial notes under the registration
rights agreement.
Expiration Date........................... 5:00 p.m., New York City time, , 2002, unless we
extend the exchange offer, in which case the term
"expiration date" means the latest date and time to
which the exchange offer is extended.
Interest on the New Notes and the Initial
Notes................................... Each new note will bear interest from August 16, 2001.
If your initial notes are accepted for exchange, you
will not receive accrued interest on the initial notes
and will be deemed to have waived the right to receive
any interest on the initial notes from and after August
16, 2001.
Conditions to the Exchange Offer.......... The exchange offer is subject to the conditions that the
exchange offer not violate any applicable law or
interpretation of the staff of the SEC and that there be
no pending or threatened proceeding that would
reasonably be expected to impair our ability to proceed
with the exchange offer, as further described herein.
The exchange offer is not conditioned upon any minimum
aggregate principal amount of initial notes being
tendered in the exchange.
Procedures for Tendering Initial Notes.... If you wish to accept the exchange offer, you must
complete,
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sign and date the accompanying letter of transmittal in
accordance with its instructions and deliver the letter
of transmittal, together with the initial notes and any
other required documentation, to the exchange agent at
the address set forth in the letter of transmittal prior
to 5:00 p.m., New York City time, on the expiration
date. If you hold initial notes through The Depository
Trust Company ("DTC") and wish to accept the exchange
offer, you must do so under DTC's Automated Tender Offer
Program, by which you will agree to be bound by the
letter of transmittal. Confirmation of such book-entry
transfer must be received by the exchange agent prior to
the expiration date.
Special Procedures for Beneficial......... If you are a beneficial owner whose initial notes are
registered in the name Owners of a broker, dealer,
commercial bank, trust company or other nominee and you
wish to tender in the exchange offer, you should contact
the person in whose name your initial notes are
registered promptly and instruct the person to tender on
your behalf. If you wish to tender in the exchange offer
on your own behalf, you must, before completing and
executing the letter of transmittal and delivering your
initial notes, either make appropriate arrangements to
register ownership of the initial notes in your name or
obtain a properly completed bond power from the person
in whose name your initial notes are registered. The
transfer of registered ownership may take considerable
time.
Guaranteed Delivery Procedures............ If you wish to tender your initial notes in the exchange
offer and your initial notes are not immediately
available or you cannot deliver your initial notes, the
letter of transmittal and any other required documents
or you cannot comply with the procedures for book-entry
transfer prior to the expiration date, you may tender
your initial notes according to the guaranteed delivery
procedures described herein.
Withdrawal Rights......................... You may withdraw your tenders at any time prior to 5:00
p.m., New York City time, on the expiration date
according to the procedures described herein.
Acceptance of Initial Notes and Delivery
of New Notes............................ Subject to certain conditions summarized above, we will
accept for exchange any and all initial notes that are
properly tendered in the exchange offer prior to the
expiration date. The new notes issued in the exchange
offer will be delivered promptly after the expiration
date.
Certain Federal Income Tax
Considerations.......................... With respect to the exchange of initial notes for new
notes:
- the exchange will not constitute a taxable exchange
for federal income tax purposes; and
- you will not recognize any gain or loss upon receipt
of the new notes.
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You must include interest on the new notes in gross
income to the same extent as interest on the initial
notes.
Exchange and Registration Rights
Agreement............................... In connection with the sale of the initial notes, we
entered into an exchange and registration rights
agreement with the initial purchasers of the initial
notes that grants the holders of the initial notes
registration rights. By making this exchange offer, we
will have fulfilled most of our obligations under the
registration rights agreement. If you do not tender your
initial notes in the exchange offer, you will not have
any further registration rights under the registration
rights agreement or otherwise unless you were not
eligible to participate in the exchange offer, as
further described herein. If you are eligible to
participate in the exchange offer and do not tender your
initial notes, you will continue to hold the untendered
initial notes, which will continue to be subject to
restrictions on transfer under the Securities Act.
Exchange Agent............................ The Chase Manhattan Bank.
Use of Proceeds........................... We will not receive any proceeds from the issuance of
the new notes in the exchange offer.
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TERMS OF THE NEW NOTES
The following is a summary of the terms of the new notes. The form and terms
of the new notes are substantially identical to the form and terms of the
initial notes except that:
- the new notes have been registered under the Securities Act and,
therefore, will not bear legends restricting their transfer; and
- the holders of the new notes, except in limited circumstances, will not be
entitled to further registration rights under the registration rights
agreement or to receive additional interest on the new notes if we fail to
comply with certain registration obligations.
The new notes will evidence the same debt as the initial notes and will be
governed by the same indenture under which the initial notes were issued.
THE NEW NOTES
SENIOR NOTES DUE 2004
Securities Offered...................... $300,000,000 principal amount of 6.375% notes due August
15, 2004.
Maturity Date........................... August 15, 2004.
Interest Rate........................... 6.375% per annum, accruing from August 16, 2001.
Interest Payment Dates.................. Each February 15 and August 15, commencing February 15,
2002.
Optional Redemption..................... We may, at any time, redeem the notes due 2004, in whole
or in part at the redemption prices described herein.
SENIOR NOTES DUE 2008
Securities Offered...................... $750,000,000 principal amount of 7.625% notes due August
15, 2008.
Maturity Date........................... August 15, 2008.
Interest Rate........................... 7.625% per annum, accruing from August 16, 2001.
Interest Payment Dates.................. Each February 15 and August 15, commencing February 15,
2002.
Optional Redemption..................... We may, at any time, redeem the notes due 2008, in whole
or in part at the redemption prices described herein.
SENIOR NOTES DUE 2031
Securities Offered...................... $700,000,000 principal amount of 9.00% notes due August
15, 2031.
Maturity Date........................... August 15, 2031.
Interest Rate........................... 9.00% per annum, accruing from August 16, 2001.
Interest Payment Dates.................. Each February 15 and August 15, commencing February 15,
2002.
Optional Redemption..................... We may, at any time, redeem the notes due 2031, in whole
or in part at the redemption prices described herein.
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THE NOTES GENERALLY
Ranking................................. The notes will be unsecured and will rank equal in right
of payment to all our existing senior debt and all
future senior debt. The notes will be effectively junior
to our secured indebtedness and all existing and future
indebtedness, of our subsidiaries and affiliates. At
September 30, 2001, we had $6,399.6 million in long-term
debt. Of this total indebtedness $1,104.1 million was at
the subsidiary level and will be structurally senior to
the notes. Included in the subsidiary debt at September
30, 2001, was $131.5 million of secured indebtedness.
The remaining long-term debt is pari passu with the
notes.
Certain Covenants....................... The indenture governing the notes contains covenants
that limit our ability to:
- incur liens on our property or assets to secure debt,
and
- merge or consolidate with another company or sell,
lease or convey all or substantially all of our
assets.
Further Issues.......................... We may from time to time without the consent of holders
of notes of any series create and issue further notes
having the same terms and conditions as such notes so
that the further issue is consolidated and forms a
single series with that series of notes.
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RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE SPECIFIC FACTORS LISTED BELOW AS WELL AS
THE OTHER INFORMATION INCLUDED IN THIS PROSPECTUS BEFORE DECIDING TO TENDER YOUR
OUTSTANDING NOTES IN THE EXCHANGE OFFER.
IF YOU FAIL TO EXCHANGE PROPERLY YOUR INITIAL NOTES FOR NEW NOTES, YOU WILL
CONTINUE TO HOLD NOTES SUBJECT TO TRANSFER RESTRICTIONS.
We will only issue new notes in exchange for initial notes that you timely
and properly tender. Therefore, you should allow sufficient time to ensure
timely delivery of the initial notes and you should carefully follow the
instructions on how to tender your initial notes described under the caption
"The Exchange Offer--Procedures for Tendering Initial Notes" and in the letter
of transmittal that you will receive with this prospectus. Neither we nor the
exchange agent are required to tell you of any defects or irregularities with
respect to your tender of initial notes.
If you do not exchange your initial notes for new notes in the exchange
offer, the initial notes you hold will continue to be subject to the existing
transfer restrictions. In general, you may not offer or sell the initial notes
except under an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. We do not plan to register
initial notes under the Securities Act. If you continue to hold any initial
notes after the exchange offer is completed, you may have trouble selling them
because of the restrictions on transfer of the initial notes.
IF AN ACTIVE TRADING MARKET DOES NOT DEVELOP FOR THE NEW NOTES, YOU MAY BE
UNABLE TO SELL THE NEW NOTES OR TO SELL THEM AT A PRICE YOU DEEM SUFFICIENT.
The new notes will be new securities for which there is no established
trading market. We do not intend to list the new notes on any exchange. We
cannot give you any assurance as to:
- the liquidity of any trading market that may develop;
- the ability of holders to sell their new notes; or
- the price at which holders would be able to sell their new notes.
Even if a trading market develops, the new notes may trade at higher or
lower prices than their principal amount or purchase price depending on many
factors including:
- prevailing interest rates;
- the number of holders of the new notes;
- the interest of securities dealers in making a market for the new notes;
- the market for similar notes; and
- our financial performance.
We understand that the initial purchasers of the initial notes presently
intend to make a market in the new notes. However, they are not obligated to do
so and may discontinue making a market in the new notes at any time without
notice. Finally, if a large number of holders of initial notes do not tender
initial notes or tender initial notes improperly, the limited amount of new
notes that would be issued and outstanding after we complete the exchange offer
could adversely affect the development of a market for the new notes.
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THE COVENANTS IN THE NEW NOTES DO NOT LIMIT OUR ABILITY TO INCUR DEBT; IF WE
INCUR SUBSTANTIAL ADDITIONAL DEBT, THESE HIGHER LEVELS OF DEBT MAY AFFECT OUR
CREDITWORTHINESS.
The indenture does not restrict our ability to incur indebtedness or require
us to maintain financial ratios or specified levels of net worth or liquidity.
If we incur substantial additional indebtedness in the future, these higher
levels of indebtedness may affect our creditworthiness.
A DOWNGRADING IN OUR CREDIT RATINGS WILL LIKELY REDUCE THE MARKET VALUE OF THE
NOTES AND MAY CAUSE NEW FINANCIAL COVENANTS TO BE APPLICABLE.
Currently, our senior unsecured indebtedness carries an investment grade
rating; however our Standard & Poor's rating is on negative watch. It is our
intention to maintain investment grade credit ratings for our senior unsecured
indebtedness. We have consulted with Standard & Poor's on our financial
objectives. Our ability to maintain our investment grade rating is dependent
upon the results of operations and our ability to complete the sale of our
public utility assets. If we undertake additional acquisitions, our ability to
maintain our credit rating will depend on the manner in which the acquisitions
are financed. If we fail to preserve the strength of our balance sheet,
subsequent acquisitions could result in a downgrading of the ratings applicable
to our senior unsecured indebtedness, including the notes. A downgrading would
likely reduce the market value of the notes. If we fail to maintain an
investment grade rating for our senior unsecured indebtedness, our agreement for
the $200 million loan that we currently have outstanding with the Rural
Telephone Finance Cooperative (or RTFC) also requires that we maintain an
interest coverage ratio of 2 to 1 and a leverage ratio of 6 to 1 or lower. We
currently satisfy both ratios and could prepay the RTFC loan with our credit
facilities if such covenants contained in the RTFC loan agreement were to be
applicable and at such time we were not in compliance with such covenants.
WE MAY UNDERTAKE ADDITIONAL ACQUISITIONS IN A MANNER WHICH COULD ALTER OUR
CAPITAL STRUCTURE AND ADVERSELY AFFECT THE MARKET VALUE OF THE NOTES.
We have recently grown rapidly through acquisitions. We expect to continue
to explore additional opportunities to expand through the acquisitions of assets
or entities. In connection with any such acquisitions, we may incur substantial
additional indebtedness, refinance existing indebtedness or otherwise change our
capital structure or enter into one or more joint ventures to hold assets or
entities. While we intend to undertake acquisitions in a manner that would
maintain our investment grade rating, there can be no assurance that we will be
successful in doing so. If we fail to maintain a capital structure that lenders,
rating agencies and the market in general deems suitable, there may be an
adverse effect on the market value of the notes.
WE MAY BE UNABLE TO SUCCESSFULLY DIVEST OUR PUBLIC UTILITIES SERVICES SEGMENTS
IN A TIMELY MANNER WHICH MAY ADVERSELY AFFECT OUR FINANCING PLANS.
A key component of our business strategy involves the divestiture of our
public utilities services segments. Failure to sell our public utilities
services segments on acceptable terms or to complete agreed sales within agreed
time periods may adversely affect our ability to obtain new financing on
acceptable terms to continue to expand our telecommunications business
internally and to meet competitive challenges. Sales of our public utilities
services segments require regulatory approval and in some cases contain
financing conditions. We cannot be sure that we will receive the necessary
regulatory approvals or the applicable purchasers will obtain the required
financing prior to the expirations of closing deadlines contained in our sale
agreements. Therefore, the planned sale of our
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public utilities services segments may not occur within the anticipated time
periods. Examples of delays or factors which may affect our proposed
transactions include:
- Our agreements to sell our Arizona and Vermont electric divisions have
been terminated due to the failure of the proposed purchaser to obtain
financing.
- The Hawaii Public Utility Commission has denied the initial application
requesting approval of the proposed sale of our Kauai electric division to
Kauai Island Electric Co-op. Our agreement for the sale of this division
may be terminated if regulatory approval is not received before
February 2002.
Our failure to consummate these divestitures could adversely affect our
financing plans, credit ratings and internal expansion.
UNTIL WE DIVEST OUR PUBLIC UTILITIES SERVICES SEGMENTS WE WILL BE SUBJECT TO THE
RISKS OF THE PUBLIC UTILITIES BUSINESS.
We intend to divest our public utilities services segments in order to focus
on the telecommunications sector. Until we complete our divestitures on
acceptable terms, we remain subject to continuing risks of the public utilities
business. These risks include exposure to rapidly fluctuating prices for gas and
electricity in a regulated or partially regulated environment and financial
instability in the public utilities industry in certain states. For example:
- In Arizona, we are deferring $98.0 million of purchase power costs as of
September 30, 2001. We have deferred charging these costs to consumers and
have recorded them as a regulatory asset on our balance sheet in
anticipation of recovering certain amounts through future rate
adjustments. On July 16, 2001, we entered into a new seven year purchase
agreement which allows us to purchase all power required for our
operations at a fixed rate.
- In Vermont, we belong to a Vermont utility consortium that purchases power
from a Canadian power generation facility. Two participants in the
consortium, representing an aggregate of 83% of the purchase commitment,
have experienced financial difficulties. If they default on their purchase
commitments, we, as a 10% participant, and other members of the consortium
will be obligated to purchase the defaulting parties' share of power on a
pro rata basis. We will be exposed to any price differential between the
price that we pay for the power and the market price for the power.
- The market for energy has become more unstable recently, particularly in
states such as California. Continued market instability in California or
in other jurisdictions may have an adverse effect upon the energy market
generally and our operations specifically.
WE HAVE SUBSTANTIAL EXISTING INDEBTEDNESS AND MAY INCUR SUBSTANTIAL ADDITIONAL
OBLIGATIONS.
As of September 30, 2001, we had outstanding long-term indebtedness of
approximately $6,399.6 million of which $156.0 million was classified as
current. This amount includes indebtedness of our 85%-owned subsidiary, Electric
Lightwave, Inc., or ELI. On September 30, 2001, we had available lines of credit
with financial institutions in the amounts of $2.65 billion. As of
September 30, 2001, no borrowings were outstanding under these credit
facilities. On October 24, 2001, we replaced these credit facilities with
available revolving lines of credit with financial institutions in the amounts
of $680 million and $100 million. An additional $25 million was provided by a
lender who was added to the credit facilities after October 24, 2001, for total
available commitments of $805 million. The credit facilities have similar terms
and conditions. The expiration dates are October 24, 2006. During the term of
the facilities we may borrow, repay and reborrow funds. On a consolidated basis,
we paid $113.0 million in interest on our long-term indebtedness during the
fiscal quarter ended September 30, 2001. If the long-term indebtedness
outstanding on September 30, 2001 had been outstanding for the
12
entire fiscal quarter then ended, we would have paid $124.7 million in interest
on our long-term indebtedness for that quarter based upon the interest rates in
effect on September 30, 2001. Of our long-term indebtedness at September 30,
2001, $5,863.3 million of such indebtedness bore a fixed interest rate and
$536.3 million of such indebtedness bore interest at a floating rate.
As of September 30, 2001, ELI had outstanding indebtedness of approximately
$1,013.0 million. ELI has borrowed $400.0 million under a revolving line of
credit with commercial banks that expires on November 21, 2002 and has issued
$325.0 million in indebtedness that matures on May 14, 2004. In addition, ELI
has entered into leases for telecommunication facilities, including one with a
final purchase option due on April 30, 2002 in the amount of $110.0 million. We
have guaranteed $910.0 million of indebtedness and other obligations of ELI. We
do not expect that ELI will have sufficient resources from internally generated
funds to make all of these required payments. Therefore, ELI must rely upon the
financial markets and us to refinance all or a portion of this indebtedness.
There can be no assurance that ELI will be successful in refinancing this
indebtedness. We have committed to continue to finance ELI's cash requirements
through a revolving credit facility to ELI in the amount of $450.0 million that
matures on October 30, 2005. As of September 30, 2001, $150.0 million principal
amount was outstanding under this facility.
We must use a portion of our future cash flow from operations to pay the
principal and interest on our indebtedness, which will reduce the funds
available for our operations, including capital investments and business
expenses. This could hinder our ability to adjust to changing market and
economic conditions. If we incur significant additional indebtedness, our credit
ratings could be adversely affected. As a result, our borrowing costs could
increase and our access to capital may be adversely affected.
WE MAY BE UNABLE TO ACHIEVE IMPROVED OPERATING RESULTS FROM OUR NEWLY ACQUIRED
OPERATIONS AND EFFICIENTLY INTEGRATE THESE OPERATIONS INTO OUR EXISTING
BUSINESS.
In order to accomplish growth in profitability, we will need to increase our
revenues per customer through enhanced products and services as well as attract
new customers while retaining our existing customer revenue base. In addition,
we need to integrate our newly acquired operations into our existing business.
Our strategy is premised, in part, on our ability to timely consummate our
pending telecommunications acquisitions and to improve operating results in our
existing and to-be-acquired telecommunications businesses by introducing new
communications products and services, expanding the penetration of existing
services and improving operating efficiencies.
The rapid growth in the size of our telecommunications business though our
acquisitions and our ongoing transformation into a telecommunications company
poses challenges for us to monitor our operations, costs, regulatory compliance,
and service quality and to maintain other necessary internal controls. If we are
not able to meet these challenges effectively, our results of operations may be
harmed.
A SIGNIFICANT PORTION OF OUR REVENUES COMES FROM ACCESS CHARGES WHICH MAY BE
REDUCED AT ANY TIME PURSUANT TO NEW REGULATIONS.
A significant portion of our revenues comes or is derived from access
charges paid by interexchange carriers, or IXCs, for services we provide in
originating and terminating intrastate and interstate long-distance telephone
calls. The amount of access charge revenues we receive for these services is
regulated by the Federal Communications Commission, or FCC, and state regulatory
agencies. Recent rulings regarding access charges have lowered the amount of
revenue we receive from this source. In addition, a portion of our access
revenues is received from state and federal universal service funds based upon
the high cost of providing telephone service to certain rural areas. In the
future, there may be proposals by state or federal regulatory agencies to
eliminate or reduce these
13
revenues. A material reduction in the revenues we receive from these funds would
adversely affect our financial results. We are unable to predict the future
actions of the various regulatory bodies, but such actions could materially
affect our business.
WE FACE COMPETITION FROM NUMEROUS COMPETITORS CURRENTLY ACTIVE IN OUR MARKETS OR
WHICH MAY ENTER OUR MARKETS.
The telecommunications industry is a competitive industry. The traditional
dividing lines between long distance, local, wireless, cable and internet
services are becoming increasingly blurred. Through mergers and various service
integration strategies, services providers are striving to provide integrated
solutions both within and across geographic markets. As a diversified full
service incumbent local exchange carrier, or ILEC, our competitors are
competitive local exchange carriers, or CLECs, and other providers (or potential
providers) of services, such as internet service providers, or ISPs, satellite
companies, neighboring ILECs and cable companies that may provide services
competitive with ours or services that we intend to introduce. We cannot assure
you that we will be able to compete effectively with these industry participants
in all of our operations.
In addition, wireless providers currently compete in territories of all of
our rural telephone exchange subsidiaries. Increased competition from these
wireless providers is expected. We cannot predict the effects of greater
competition from wireless providers. Furthermore, regions served by access lines
that have not had substantial upgrading over the last several years are
particularly vulnerable to competition. Until we complete the upgrade of our
access lines, the services we provide in the areas served by these access lines
are vulnerable to competition from operators of more updated systems.
We expect competition to intensify as a result of the entrance of new
competitors and the development of new technologies, products and services. We
cannot predict which of many possible future technologies, products or services
will be important to maintain our competitive position or what expenditures will
be required to develop and provide these technologies, products or services. Our
ability to compete successfully will depend on marketing and on our ability to
anticipate and respond to various competitive factors affecting the industry,
including a changing regulatory environment that may affect our competitors and
us differently, new services that may be introduced, changes in consumer
preferences, demographic trends, economic conditions and discount pricing
strategies by competitors.
ELI FACES SUBSTANTIAL COMPETITION FOR ITS TELECOMMUNICATIONS SERVICES FROM
LARGER COMPANIES.
ELI's competitors for telecommunications services are primarily larger
ILECs, CLECs and IXCs. Because it is not an incumbent provider, ELI's ability to
succeed in the telecommunications services market depends to a large extent on
its ability to build tailored, value-added network services for business
customers and to maintain its customer base and develop additional business
customers in its core geographic areas in light of changing technologies.
We anticipate that general pricing competition and pressures will increase
significantly. We have not obtained significant market share in any of the areas
where we offer our CLEC services, nor do we expect to do so given the size of
our telecommunications services markets, the intense competition therein and the
diversity of customer requirements. There can be no assurance that we will be
able to compete effectively in any of our markets. Furthermore, the recent
bankruptcies and weakened financial position of a number of CLECs have resulted
in a more demanding operating environment for CLECs, as both customers and
suppliers are more concerned about each CLEC's creditworthiness.
14
MANY OF OUR COMPETITORS HAVE SUPERIOR RESOURCES, WHICH MAY PLACE US AT A COST
AND PRICE DISADVANTAGE AND RESULT IN LOWER REVENUES AND MARGINS.
Many of our current and potential competitors, including the regional Bell
operating companies, have market presence, engineering, technical and marketing
capabilities and financial, personnel and other resources substantially greater
than ours. In addition, some of our competitors can raise capital at a lower
cost than we can. Consequently, some competitors may be able to develop and
expand their communications and network infrastructures more quickly, adapt more
swiftly to new or emerging technologies and changes in customer requirements,
take advantage of acquisition and other opportunities more readily and devote
greater resources to the marketing and sale of their products and services than
we can. Also, the greater brand name recognition of some competitors may require
us to price our services at lower levels in order to win business. Finally, the
cost advantages of some competitors may give them the ability to reduce their
prices for an extended period of time if they so choose.
OUR COMPANY AND INDUSTRY ARE HIGHLY REGULATED, IMPOSING SUBSTANTIAL COMPLIANCE
COSTS AND RESTRICTING OUR ABILITY TO COMPETE IN OUR TARGET MARKETS.
As an ILEC, we are subject to significant regulation from federal, state and
local authorities. This regulation restricts our ability to raise our rates,
especially in our basic services, and imposes substantial compliance costs on
us. Regulation restricts our ability to compete and, in some jurisdictions, it
may restrict our ability to expand our services. In addition, changes to the
regulations that govern us may have an adverse effect upon our business by
reducing the allowable fees that we may charge, imposing additional compliance
costs, or otherwise changing the nature of our operations and the competition in
our industry.
IN THE FUTURE AS COMPETITION ENTERS OUR MARKETS, WE MAY BE UNABLE TO MEET THE
TECHNOLOGICAL NEEDS OR EXPECTATIONS OF OUR CUSTOMERS AND, CONSEQUENTLY, LOSE
MARKET SHARE.
The telecommunications industry is subject to significant changes in
technology. If we do not replace or upgrade technology and equipment that
becomes obsolete, we will be unable to compete effectively because we will not
be able to meet the needs or expectations of our customers. Replacing or
upgrading our infrastructure could result in significant capital expenditures
which could adversely affect our financial position. The failure to replace or
upgrade our infrastructure could cause us to lose market share to better
capitalized competitors.
DETERIORATING ECONOMIC CONDITIONS COULD HARM OUR BUSINESS.
Demand for communications products and services may be adversely affected by
a downturn in the United States economy as well as changes in the global
economy. Key United States economic indicators have recently signaled a
softening of the United States economy. As a result, we may experience decreased
demand for our communications products and services. A decline in the demand for
and usage of communications products and services could have an adverse effect
on our results of operations and financial condition.
Many of ELI's customers are in various internet-related businesses,
including internet service providers, some of which have been adversely affected
by recent business trends in that sector. To the extent the credit quality of
these customers deteriorates or these customers seek bankruptcy protection,
ELI's operating results may be adversely affected.
15
AS A HOLDING COMPANY WITH RESPECT TO TELECOMMUNICATIONS ASSETS, WE WILL REQUIRE
DIVIDENDS FROM SUBSIDIARIES TO MEET CASH REQUIREMENTS OR PAY DIVIDENDS.
Citizens conducts all its telecommunications business operations through its
subsidiaries and may arrange for certain telecommunications assets subsequently
acquired to be held in special purpose legal entities with separate financing.
Accordingly, following the divestiture of our public utilities services
segments, Citizens' only source of cash to pay dividends or make other
distributions on its capital stock or to pay interest and principal on its
outstanding indebtedness will be distributions relating to its ownership
interest in its telecommunications subsidiaries and affiliates from the net
earnings and cash flow generated by such subsidiaries. We cannot be sure that
Citizens' telecommunications subsidiaries will generate sufficient cash flow to
pay or distribute such dividends or funds, or that applicable state law,
regulatory action, and contractual restrictions, including negative covenants
contained in any debt instruments of such subsidiaries and affiliates, would
permit such dividends, distributions or payments. Our subsidiaries are not
currently subject to any contractual or legal provision that materially
restricts their ability to pay dividends or otherwise make distributions to
Citizens in amounts sufficient to pay interest and principal on our outstanding
obligations. Nevertheless, in the future, we or our subsidiaries may enter into
indebtedness or other agreements which may contain such restrictions or legal or
regulatory requirements to that effect may restrict us and our subsidiaries.
OUR ACTUAL OPERATING RESULTS WILL DIFFER FROM THE RESULTS INDICATED IN THE PRO
FORMA FINANCIAL STATEMENTS AND THIS COULD ADVERSELY AFFECT THE VALUE OF THE
NOTES.
The pro forma information incorporated by reference in this prospectus is
intended to reflect our results of operations for the year ended December 31,
2000 and for the nine months ended September 30, 2001 combined with the results
of operations for certain entities which we have acquired and which it is
probable we will acquire, along with the related financings and the disposition
of our public utilities services entities. This 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 and businesses been combined throughout these
periods. If the companies and businesses had actually been combined in prior
periods, 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 and businesses will experience
after completion of these transactions.
16
PROVISION OF INFORMATION
In making your decision to participate in the exchange offer and exchange
the initial notes held by you for new notes, you should rely only on the
information contained in or incorporated into this prospectus. We have not
authorized any other person to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely on
it. You should assume that the information appearing in this prospectus is
accurate as of the date on the front cover of this prospectus only. Our
business, financial condition, results of operations and prospects may have
changed since that date. Neither the delivery of this prospectus nor any sale
made hereunder shall under any circumstances imply that the information herein
is correct as of any date subsequent to the date on the cover of this
prospectus.
FORWARD-LOOKING STATEMENTS
Our forward-looking statements are subject to a variety of factors that
could cause actual results to differ significantly from current beliefs.
Some statements and information contained in this prospectus and in the
documents incorporated by reference into this prospectus are not historical
facts, but are "forward-looking statements," as such term is defined in the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements can be identified by the use of forward-looking terminology such as
"believes," "expects," "plans," "may," "will," "would," "could," "should," or
"anticipates" or the negative of these words or other variations of these words
or other comparable words, or by discussions of strategy that involve risks and
uncertainties. Forward-looking statements may differ from actual future results
due to, but not limited to, those factors referenced under "Risk Factors" and/or
any of the following possibilities:
- changes in economic conditions;
- changes in the capital markets;
- changes in industry conditions;
- changes in our credit rating; and
- changes in accounting policies or practices adopted voluntarily or as
required by regulations or generally accepted accounting principles.
You should consider these important factors as well as those referenced
under "Risk Factors" in evaluating any statement in this prospectus or otherwise
made by us or on our behalf. We have no obligation to update or revise these
forward-looking statements.
17
USE OF PROCEEDS
We will not receive any proceeds from the issuance of the new notes in the
exchange offer. The proceeds from the original issuance of the notes were used
to repay then outstanding indebtedness under our revolving bank credit facility
with an effective interest rate of 4.81% per annum as of June 30, 2001, to repay
equity forward contracts and for general corporate purposes.
18
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables contain consolidated selected financial data of
Citizens and its subsidiaries as of the dates and for the periods indicated.
Historical financial data for the years ended December 31, 1996, 1997, 1998,
1999 and 2000 have been derived from our audited financial statements.
Historical data for the nine months ended September 30, 2000 and 2001 have been
derived from our unaudited financial statements.
The following data should be read together with our Form 10-K for the year
ended December 31, 2000 and Form 10-Q for the nine months ended September 30,
2001 which are incorporated into this document by reference. For copies of the
financial data we incorporate by reference, see "Where You Can Find More
Information."
The following pro forma data has been prepared to illustrate the effects of
the GTE, US WEST and the Frontier Local Exchange Carrier Businesses acquired and
the related financings, and the dispositions and probable dispositions of our
public services businesses had these transactions been completed at the
beginning of the respective periods. This information should be read together
with our Form 8-K filed on December 13, 2001 which is incorporated by reference.
See "Where You Can Find More Information."
($ IN THOUSANDS, EXCEPT PER SHARE YEAR ENDED DECEMBER 31,
AMOUNTS) ---------------------------------------------------------------------------
PRO FORMA
1996 1997 1998 1999 2000 2000
---------- ---------- ---------- ---------- ---------- ----------
Revenue(1)...................... $1,218,222 $1,303,901 $1,448,588 $1,598,236 $1,802,358 2,096,001
Income (loss) from continuing
operations before cumulative
effect of change in accounting
principle and extraordinary
expense....................... $ 160,483 $ 2,066 $ 46,444 $ 136,599 $ (40,071) (156,427)
Net income (loss)............... $ 178,660 $ 10,100 $ 57,060 $ 144,486 $ (28,394) (144,750)
Basic income (loss) per share of
Common Stock from continuing
operations before cumulative
effect of change in accounting
principle and extraordinary
expense(3).................... $ 0.61 $ 0.01 $ 0.18 $ 0.52 $ (0.15) (.55)
Available to common shareholders
per common share(3)........... $ 0.68 $ 0.04 $ 0.22 $ 0.55 $ (0.11) (.50)
Available to common shareholders
per diluted share (3)......... 0.68 0.04 0.22 0.55 (0.11) (.50)
Stock dividends declared on
Common Stock(4)............... 6.56% 5.30% 3.03% -- -- --
FOR THE NINE MONTHS
($ IN THOUSANDS, EXCEPT PER SHARE ENDED SEPTEMBER 30,
AMOUNTS) ------------------------------------
PRO FORMA
2000 2001(2) 2001(2)
---------- ---------- ----------
Revenue(1)...................... $1,320,019 $1,791,144 $1,644,439
Income (loss) from continuing
operations before cumulative
effect of change in accounting
principle and extraordinary
expense....................... $ 3,622 $ 50,589 $ (59,130)
Net income (loss)............... $ 11,804 $ 18,633 $ (102,761)
Basic income (loss) per share of
Common Stock from continuing
operations before cumulative
effect of change in accounting
principle and extraordinary
expense(3).................... $ 0.01 $ 0.14 $ (.25)
Available to common shareholders
per common share(3)........... $ 0.05 $ 0.02 $ (.41)
Available to common shareholders
per diluted share (3)......... 0.04 0.02 (.41)
Stock dividends declared on
Common Stock(4)............... -- -- --
AS OF DECEMBER 31, AS OF SEPTEMBER 30,
-------------------------------------------------------------- ------------------------
1996 1997 1998 1999 2000 2000 2001
---------- ---------- ---------- ---------- ---------- ---------- -----------
Total assets.......................... $4,523,148 $4,872,852 $5,292,932 $5,771,745 $6,955,006 $6,519,811 $10,385,131
Long-term debt........................ $1,454,421 $1,627,388 $1,819,555 $2,107,460 $3,062,289 $2,925,680 $ 6,243,591
Shareholders' equity.................. $1,678,183 $1,679,211 $1,792,771 $1,919,935 $1,720,001 $1,849,104 $ 1,986,136
(1) Represents revenue from continuing operations. Revenue from Acquisitions
contributed $49.5 million for the year ended December 31, 2000 and
$350.3 million for the nine months ended September 30, 2001.
(2) The nine months ended September 30, 2001 reflects a $139.3 million pre-tax
gain on the sale of our Louisiana Gas operations, pre-tax restructuring
expenses of $13.0 million related to our decision to close our operations
support center in Plano, Texas and an extraordinary after tax expense of
$43.6 million related to our decision to discontinue the application of
Statement of Financial Accounting Standards No. 71 to our local exchange
telephone operations.
(3) 1997 and 1996 are adjusted for subsequent stock dividends. The nine months
ended September 30, 2001 reflects a reduction in income from continuing
operations for the carrying cost of our equity forward contracts of
$13.6 million.
(4) Compounded annual rate of quarterly stock dividends.
19
RATIO OF EARNINGS TO FIXED CHARGES
The following table shows our consolidated ratio of earnings to fixed
charges and our consolidated ratio of earnings to combined fixed charges and
preferred dividends. Earnings consist of income (loss) before income taxes plus
fixed charges. Fixed charges consist of interest charges, and an amount
representing the interest factor included in rentals (assumed to be one-third)
and preference security dividend requirements.
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
---------------------------------------------------- SEPTEMBER 30,
1996 1997(1) 1998 1999(2) 2000(3) 2001(2)
-------- -------- -------- -------- -------- -------------
Consolidated ratio of earnings to fixed charges..... 3.44 .98 1.28 2.22 .62 1.31
Consolidated ratio of earnings to combined fixed
charges and preferred dividends................... 3.22 .98 1.26 2.14 .64 1.28
------------------------
(1) In 1997, the ratios indicated less than one-to-one coverage. The amount of
the deficiency was $2.2 million for both the consolidated ratio of earnings
to fixed charges and consolidated ratio of earnings to combined fixed
charges and preferred dividends.
(2) In 1999, we recorded pre-tax non-operating gains of approximately
$221 million related to the sale of our investments in Centennial Cellular
Corp., Century Communications Corp. ("Century") and our interest in a cable
television joint venture with a subsidiary of Century. Excluding such
pre-tax non-operating gains, the ratio of earnings to fixed charges for 1999
is 0.67 and the ratio of earnings to combined fixed charges and preferred
dividends for 1999 is 0.69. For the nine months ended September 30, 2001, we
recorded a pretax non-operating gain of $139.3 million related to the sale
of our Louisiana gas operations. Excluding the 2001, pre-tax non-operating
gain, the ratio of earnings to fixed charges is .79 and the ratio of
earnings to combined fixed charges and preferred dividends is .80.
(3) In 2000, the ratios indicated less than one-to-one coverage. The amount of
the deficiency was $78.2 million for both the consolidated ratio of earnings
to fixed charges and consolidated ratio of earnings to combined fixed
charges and preferred dividends.
20
THE EXCHANGE OFFER
The following discussion summarizes the material terms of the exchange
offer, including those set forth in the letter of transmittal distributed with
this prospectus. This summary is qualified in its entirety by reference to the
full text of the documents underlying the exchange offer.
REGISTRATION RIGHTS
We sold the initial notes to Morgan Stanley & Co. Incorporated, J.P. Morgan
Securities, Inc., Banc of America Securities LLC, Banc One Capital
Markets, Inc., Salomon Smith Barney Inc., First Union Securities, Inc., Fleet
Securities, Inc., TD Securities (USA) Inc., Mizuho International plc., and RBC
Dominion Securities Corporation, as initial purchasers, on August 16, 2001,
under an offering memorandum dated August 13, 2001, covering $1,750,000,000
aggregate principal amount of the initial notes. Generally, the initial
purchasers subsequently resold the initial notes to "qualified institutional
buyers," as defined in Rule 144A under the Securities Act, in reliance on
Rule 144A and persons in offshore transactions in reliance on Regulation S under
the Securities Act. As part of the offering of the initial notes, we entered
into an exchange and registration rights agreement dated as of August 16, 2001.
Under the registration rights agreement, we agreed to:
- file with the SEC on or before December 14, 2001, an exchange offer
registration statement under the Securities Act relating to a registered
exchange offer for the initial notes;
- use our reasonable efforts to cause the registration statement to be
declared effective under the Securities Act no later than February 12,
2002; and
- keep the exchange offer open for not less than 30 calendar days, or longer
if required by applicable law, after the date on which notice of the
exchange offer is mailed to holders of the initial notes.
The exchange offer registration statement will be deemed not to be effective
for any period during which the offering of new notes is interfered with by any
stop order, injunction or other order or requirement of the SEC or any other
governmental agency or court.
The exchange offer gives you the opportunity to exchange your initial notes
for a like principal amount of new notes, which will be issued without a
restrictive legend and which you may generally reoffer and resell without
restrictions or limitations under the Securities Act. The exchange offer is
subject to the general terms and conditions developed by the staff of the SEC in
the Morgan Stanley No-Action Letter (Morgan Stanley and Co., Inc. (available
June 5, 1991)) and the Exxon Capital No-Action Letter (Exxon Capital Holdings
Corporation (available May 13, 1988)), as interpreted in the SEC's letter to
Shearman & Sterling, dated July 2, 1993, and similar no-action letters. However,
you are not entitled to rely on the position of the staff in these no-action
letters and, in the absence of an exemption therefrom, must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with the resale of the new notes, if you:
- are our "affiliate" within the meaning of Rule 405 under the Securities
Act;
- do not acquire the new notes in the ordinary course of your business;
- tender in the exchange offer with the intention to participate, or for the
purpose of participating, in a distribution of the new notes; or
- are a broker-dealer that acquired the initial notes directly from us.
If you are a broker-dealer receiving new notes for your own account in
exchange for initial notes, where you acquired those initial notes as a result
of market-making activities or other trading activities,
21
you must acknowledge that you will deliver a prospectus in connection with any
resale of the new notes. See "Plan of Distribution." We have agreed to include
in this prospectus information necessary to allow broker-dealers to exchange
initial notes in the exchange offer and to satisfy the prospectus delivery
requirements for resales of new notes received by the broker-dealer in the
exchange offer.
SHELF REGISTRATION
Under the registration rights agreement, we also agreed to file a shelf
registration statement to permit holders of the initial notes who were not
eligible to participate in the exchange offer, if any, to resell the initial
notes periodically without being limited by the transfer restrictions. We will
only be required to file a shelf registration statement, if:
- we are not permitted to effect the exchange offer because of any change in
law or applicable interpretations of the law by the staff of the SEC;
- for any other reason the exchange offer is not consummated by March 14,
2002;
- any holder of the initial notes so requests within 90 days after the
consummation of the exchange offer with respect to initial notes held by
that holder that are not eligible to be exchanged for new notes in the
exchange offer; or
- any applicable law or interpretations do not permit any holder of initial
notes to participate in the exchange offer.
If a shelf registration statement is required, we will file the shelf
registration statement as promptly as practicable (but in no event more than
60 days after when we are so required), which we refer to as the "shelf filing
date." We will use our reasonable best efforts to have the shelf registration
statement declared effective by the SEC as promptly as practicable after it is
filed and to keep the shelf registration statement effective for a period ending
on the earlier of August 16, 2003, or the date on which all securities
registered under the shelf registration statement become eligible for resale
without volume restrictions under Rule 144 of the Securities Act.
ADDITIONAL INTEREST
If any of the following events occur, each of which we refer to as a
registration default:
- the exchange offer registration statement is not filed with the SEC on or
before December 14, 2001, or the shelf registration statement is not filed
with the SEC on or before the shelf filing date;
- the exchange offer registration statement is not declared effective by
February 12, 2002;
- the exchange offer is not consummated by March 14, 2002; or
- the shelf registration statement is not filed and declared effective
within 60 days after the shelf filing date, (or in the case of a shelf
registration required to be filed in response to a change in law or the
applicable interpretations of the Securities and Exchange Commission, if
later, within 90 calendar days after publication of such change in law or
interpretation);
we will be obligated to pay, as liquidated damages for such registration
default, additional interest to each holder of initial notes subject to transfer
restrictions, during the period of one or more registration defaults, in an
amount equal to 0.25% per annum of the principal amount of the initial notes
subject to transfer restrictions held by the holder. All accrued additional
interest will be paid to holders in the same manner as interest payments on the
initial notes on semi-annual payment dates that correspond to interest payment
dates for the initial notes. Additional interest only accrues during a
registration default.
22
You will not be entitled to receive any additional interest if you were, at
any time while the exchange offer was pending, eligible to exchange and did not
validly tender your initial notes for new notes in the exchange offer.
Except as set forth above, this prospectus may not be used for any offer to
resell, resale or other transfer of new notes.
Except as set forth above, after consummation of the exchange offer, holders
of notes have no registration or exchange rights under the registration rights
agreement. See "--Consequences of Failure to Exchange."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "expiration date" means 5:00 p.m., New York City time, on
, 2002, unless we, in our sole discretion, extend the period of time
during which the exchange offer is open, in which case the term "expiration
date" means the latest date and time to which the exchange offer is extended. To
extend the exchange offer, we will notify the exchange agent of any extension by
oral or written notice, followed by a public announcement of the extension no
later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled expiration date.
We reserve the right, in our reasonable judgment:
- to delay accepting any initial notes, to extend the exchange offer or to
terminate the exchange offer if any of the conditions described below
under the heading "--Conditions" have not been satisfied, by giving oral
or written notice of such delay, extension or termination to the exchange
agent; or
- to amend the terms of the exchange offer in any manner.
Any delay in acceptance, extension, termination or amendment will be followed as
promptly as practicable by a public announcement of the delay. If we amend the
exchange offer in a manner we determine constitutes a material change, we will
promptly disclose the amendment in a prospectus supplement that is filed with
the SEC as an amendment to the registration statement.
TERMS OF THE EXCHANGE OFFER
Subject to terms and conditions described in this prospectus and in the
letter of transmittal, we will accept for exchange initial notes which are
properly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the expiration date. We will issue $1,000 principal amount of new notes in
exchange for each $1,000 principal amount of outstanding initial notes accepted
in the exchange offer. Holders of the initial notes may tender some or all of
their initial notes in the exchange offer; however, initial notes may be
tendered only in integral multiples of $1,000. The new notes will evidence the
same debt as the initial notes and will be entitled to the benefits of the
indenture. Initial notes surrendered for new notes will be retired and cancelled
and cannot be reissued. The form and terms of the new notes are substantially
identical to the form and terms of the initial notes, except that:
- the new notes have been registered under the Securities Act and thus will
not bear legends restricting their transfer, and
- holders of the new notes generally will not be entitled to rights under
the registration rights agreement or additional interest, which rights
generally will terminate upon consummation of the exchange offer.
Holders of initial notes do not have any appraisal or dissenters' rights
under applicable law or the indenture as a result of the exchange offer. We
intend to conduct the exchange offer in accordance
23
with the applicable requirements of the Securities Exchange Act and the rules
and regulations of the SEC thereunder, including Rule 14e-l.
We will be deemed to have accepted validly tendered initial notes when, as
and if we have given oral or written notice of our acceptance to the exchange
agent. The exchange agent will act as agent for the tendering note holders under
the exchange agent agreement for the purpose of receiving the new notes from us.
As of the date of this prospectus, $1,750,000,000 in aggregate principal
amount of the initial notes is outstanding. All of the initial notes are
registered in the name of Cede & Co., as nominee for DTC. Solely for reasons of
administration, we have fixed the close of business on , 2002, as
the record date for the exchange offer for purposes of determining the persons
to whom this prospectus and the letter of transmittal will be mailed initially.
There will be no fixed record date for determining holders of the initial notes
entitled to participate in the exchange offer.
If any tendered initial notes are not accepted for exchange because of an
invalid tender, the occurrence of other events described in this prospectus or
otherwise, the certificates for any of those unaccepted initial notes will be
returned, without expense, to the tendering holders as promptly as practicable
after the expiration date.
Holders who tender their initial notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of
initial notes in the exchange offer. We will pay all charges and expenses, other
than transfer taxes in certain circumstances as described under the caption
"--Fees and Expenses," in connection with the exchange offer.
INTEREST ON NEW NOTES
Registered holders of new notes on the relevant record date for the first
interest payment date following the consummation of the exchange offer will
receive interest accruing from the most recent date to which interest has been
paid on the initial notes. Holders of new notes will not receive any payment in
respect of accrued interest on initial notes otherwise payable on any interest
payment date, the record date for which occurs on or after the consummation of
the exchange offer. Interest on the new notes will be payable semi-annually on
February 15 and August 15 of each year, commencing February 15, 2002.
PROCEDURES FOR TENDERING INITIAL NOTES
The tender to us of initial notes by you as described below and our
acceptance of the initial notes will constitute a binding agreement between us
and you upon the terms and subject to the conditions described in this
prospectus and in the accompanying letter of transmittal. Only holders of
initial notes may tender initial notes in the exchange offer. To tender in the
exchange offer, you must complete, sign and date the letter of transmittal, or a
facsimile thereof, have the signatures guaranteed if required by the letter of
transmittal, and mail or otherwise deliver the letter of transmittal or the
facsimile, together with the initial notes and any other required documents, to
the exchange agent so as to be received by the exchange agent at the address
shown on the cover page of the letter of transmittal prior to 5:00 p.m., New
York City time, on the expiration date. Delivery of the initial notes may be
made by book-entry transfer of the initial notes into the exchange agent's
account at DTC in accordance with the procedures described below. Confirmation
of book-entry transfer must be received by the exchange agent before the
expiration date.
By executing the letter of transmittal, you will make to us the
representations described below in the third paragraph under the heading
"--Resale of New Notes."
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The method of delivery of initial notes and the letter of transmittal and
all other required documents to the exchange agent is at your election and risk.
Instead of delivery by mail, we recommend that you use an overnight or hand
delivery service. In all cases, you should allow sufficient time to assure
delivery to the exchange agent before the expiration date. No letter of
transmittal or initial notes should be sent to us. You may request that your
broker, dealer, commercial bank, trust company or nominee effect the above
transactions for you.
If you are a beneficial owner whose initial notes are registered in the name
of a broker, dealer, commercial bank, trust company or other nominee and you
wish to tender, you should contact the registered holder promptly and instruct
the registered holder to tender on your behalf. If you are a beneficial owner
and you wish to tender the initial notes yourself, you must either make
appropriate arrangements to register ownership of the initial notes in your name
or follow the procedures described in the immediately following paragraph. You
must make these arrangements or follow these procedures before completing and
executing the letter of transmittal and delivering the initial notes. The
transfer of record ownership may take considerable time.
Signatures on the letter of transmittal or on a notice of withdrawal, as the
case may be, must be guaranteed by an "eligible institution" (as defined below)
unless the initial notes tendered:
- are signed by the registered holder, unless such holder has completed the
box entitled "Special Exchange Instructions" or "Special Delivery
Instructions" on the letter of transmittal; or
- are tendered for the account of an eligible institution.
If signatures on a letter of transmittal or a notice of withdrawal are
required to be guaranteed, the guarantee must be by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States, or an "eligible guarantor institution"
within the meaning of Rule 17A(d)-15 under the Securities Exchange Act (an
"eligible institution").
If the letter of transmittal is signed by a person other than the registered
holder of any initial notes listed therein, those initial notes must be endorsed
or accompanied by a properly completed bond power, signed by the registered
holder as the registered holder's name appears on its initial notes, with the
signature guaranteed by an eligible institution.
If the letter of transmittal or any initial notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
those persons should also indicate when signing, and, unless waived by us,
submit evidence satisfactory to us of their authority to so act with the letter
of transmittal.
We will determine in our sole discretion all questions as to the validity,
form, eligibility, including time of receipt, acceptance of tendered initial
notes and withdrawal of tendered initial notes, and our determination will be
final and binding. We reserve the absolute right to reject any and all initial
notes not properly tendered or any initial notes our acceptance of which would,
in the opinion of our counsel, be unlawful. We also reserve the right to waive
any defects, irregularities or conditions of tender as to particular initial
notes. Our interpretation of the terms and conditions of the exchange offer,
including the instructions in the letter of transmittal, will be final and
binding on all parties. Unless waived, any defects or irregularities in tenders
of initial notes must be cured within the amount of time we determine. Although
we intend to notify you of defects or irregularities in your tender of initial
notes, neither we, the exchange agent nor any other person shall incur any
liability for failure to give any notification. Tenders of initial notes will
not be deemed to have been made until those defects or irregularities have been
cured or waived. Any initial notes received by the exchange agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned by the exchange agent to the tendering holders,
unless otherwise provided in the letter of transmittal, as soon as practicable
following the expiration date.
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BOOK-ENTRY DELIVERY PROCEDURES
Promptly after the date of this prospectus, the exchange agent will
establish accounts with respect to the initial notes at DTC for purposes of the
exchange offer. Any financial institution that is a participant in DTC's systems
may make book-entry delivery of the initial notes by causing DTC to transfer
those initial notes into the exchange agent's account at DTC in accordance with
DTC's procedures for such transfer. To be timely, book-entry delivery of initial
notes requires receipt of a confirmation of a book-entry transfer ("book-entry
confirmation") prior to the expiration date. In addition, although delivery of
initial notes may be effected through book-entry transfer into the exchange
agent's account at DTC, the letter of transmittal or a manually signed facsimile
thereof, together with any required signature guarantees and any other required
documents, or an "agent's message" (as defined below) in connection with a
book-entry transfer, must, in any case, be delivered or transmitted to and
received by the exchange agent at its address set forth on the cover page of the
letter of transmittal prior to the expiration date to receive new notes for
tendered initial notes, or the guaranteed delivery procedure described below
must be complied with. Tender will not be deemed made until such documents are
received by the exchange agent. Delivery of documents to DTC does not constitute
delivery to the exchange agent.
TENDER OF INITIAL NOTES HELD THROUGH THE DEPOSITORY TRUST COMPANY
The exchange agent and DTC have confirmed that the exchange offer is
eligible for DTC's Automated Tender Offer Program. Accordingly, participants in
DTC's Automated Tender Offer Program may, instead of physically completing and
signing the applicable letter of transmittal and delivering it to the exchange
agent, electronically transmit their acceptance of the exchange offer by causing
DTC to transfer initial notes to the exchange agent in accordance with DTC's
Automated Tender Offer Program procedures for transfer. DTC will then send an
agent's message to the exchange agent.
The term "agent's message" means a message transmitted by DTC, received by
the exchange agent and forming part of the book-entry confirmation, which states
that DTC has received an express acknowledgment from a participant in DTC's
Automated Tender Offer Program that is tendering initial notes that are the
subject of the book-entry confirmation, that the participant has received and
agrees to be bound by the terms of the applicable letter of transmittal or, in
the case of an agent's message relating to guaranteed delivery, that the
participant has received and agrees to be bound by the applicable notice of
guaranteed delivery, and that we may enforce that agreement against the
participant.
GUARANTEED DELIVERY PROCEDURES
If you wish to tender your initial notes and:
- your initial notes are not immediately available;
- you cannot deliver your initial notes, the letter of transmittal or any
other required documents to the exchange agent; or
- you cannot complete the procedures for book-entry transfer, prior to the
expiration date,
you may still effect a tender if:
- the tender is made through an eligible institution;
- prior to the expiration date, the exchange agent receives from that
eligible institution a properly completed and duly executed notice of
guaranteed delivery by facsimile transmission, mail or hand delivery
setting forth the name and address of the holder, the certificate
number(s) of the initial notes (if the initial notes are not held through
DTC) and the principal amount of initial
26
notes tendered, stating that the tender is being made thereby and
guaranteeing that, within three New York Stock Exchange trading days after
the expiration date, the letter of transmittal or facsimile thereof,
together with the certificate(s) representing the initial notes or a
book-entry confirmation transfer of the initial notes into the exchange
agent's account at DTC and all other documents required by the letter of
transmittal, will be deposited by the eligible institution with the
exchange agent; and
- the properly completed and executed letter of transmittal or facsimile
thereof, as well as the certificate(s) representing all tendered initial
notes in proper form for transfer or book-entry confirmation transfer of
the initial notes into the exchange agent's account at DTC and all other
documents required by the letter of transmittal, are received by the
exchange agent within three New York Stock Exchange trading days after the
expiration date.
Upon request to the exchange agent, a notice of guaranteed delivery will be
sent to you so that you may tender your initial notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWALS OF TENDERS
Except as otherwise provided herein, you may withdraw your tender of initial
notes at any time prior to 5:00 p.m., New York City time, on the expiration
date.
To withdraw a tender of initial notes in the exchange offer, a written or
facsimile transmission notice of withdrawal must be received by the exchange
agent at the address set forth herein prior to 5:00 p.m., New York City time, on
the expiration date. Any such notice of withdrawal must:
- specify the name of the person having deposited the initial notes to be
withdrawn;
- identify the initial notes to be withdrawn including the certificate
number(s) and the principal amount of such initial notes, or, in the case
of initial notes transferred by book-entry transfer, the name and number
of the account at DTC to be credited;
- be signed by the holder in the same manner as the original signature on
the letter of transmittal by which the initial notes were tendered,
including any required signature guarantees, or be accompanied by
documents of transfer sufficient to have the trustee under the indenture
register the transfer of the initial notes into the name of the person
withdrawing the tender; and
- specify the name in which any initial notes are to be registered, if
different from that of the person who deposited the initial notes.
We will determine all questions as to the validity, form and eligibility,
including time of receipt, of these notices, and our determination shall be
final and binding on all parties. Any initial notes so withdrawn will be deemed
not to have been validly tendered for purposes of the exchange offer and no new
notes will be issued with respect thereto unless the initial notes so withdrawn
are validly retendered. Any initial notes that have been tendered but are not
accepted for exchange will be returned to their holder without cost to the
holder as soon as practicable after withdrawal, rejection of tender or
termination of the exchange offer. Properly withdrawn initial notes may be
retendered by following one of the procedures described above under the caption
"--Procedures for Tendering Initial Notes" at any time prior to the expiration
date.
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CONDITIONS
Notwithstanding any other term of the exchange offer, we will not be
required to accept for exchange any initial notes, and may terminate or amend
the exchange offer as provided in this prospectus before the acceptance of the
initial notes, if:
- the exchange offer or the making of any exchange by a holder violates any
applicable law or interpretation of the staff of the SEC; or
- any action or proceeding shall have been instituted or threatened in any
court or by any governmental agency which in our judgment would reasonably
be expected to impair our ability to proceed with the exchange offer.
If we determine in our reasonable judgment that any of the foregoing
conditions are not satisfied, we may:
- refuse to accept any initial notes and return all tendered initial notes
to the tendering holders;
- extend the exchange offer and retain all initial notes tendered before the
expiration of the exchange offer, subject, however, to the rights of
holders to withdraw such initial notes, as described under the caption
"--Withdrawals of Tenders"; or
- waive the unsatisfied conditions with respect to the exchange offer and
accept all properly tendered initial notes which have not been withdrawn.
EXCHANGE AGENT
The Chase Manhattan Bank will act as exchange agent for the exchange offer
with respect to the initial notes. The Chase Manhattan Bank also serves as
trustee under the indenture.
Questions and requests for assistance, requests for additional copies of
this prospectus or of the letter of transmittal for the initial notes and
requests for copies of the notice of guaranteed delivery should be directed to
the exchange agent, addressed as follows:
By registered or certified mail:
The Chase Manhattan Bank
55 Water Street, Second Floor
Room 234--North Building
New York, New York 10041
By facsimile for eligible institutions only: (212) 638-7380 or
(212) 638-7381
Confirm by telephone: Victor Matis (212) 638-0459
If you deliver to an address other than as set forth above it will not be a
valid delivery.
FEES AND EXPENSES
We will bear the expenses of soliciting initial notes for exchange. The
principal solicitation is being made by mail by the exchange agent. Additional
solicitation may be made by telephone, facsimile or in person by our officers
and regular employees and our affiliates and by persons so engaged by the
exchange agent.
We will pay the exchange agent reasonable and customary fees for its
services and will reimburse it for its reasonable out-of-pocket expenses in
connection with its services and pay other registration
28
expenses, including fees and expenses of the trustee under the indenture, filing
fees, blue sky fees and printing and distribution expenses.
We will pay all transfer taxes, if any, applicable to the exchange of the
initial notes in the exchange offer. If, however, certificates representing the
new notes or the initial notes for principal amounts not tendered or accepted
for exchange are to be delivered to, or are to be issued in the name of, any
person other than the registered holder of the initial notes tendered, or if
tendered initial notes are registered in the name of any person other than the
person signing the letter of transmittal, or if a transfer tax is imposed for
any reason other than the exchange of the initial notes in the exchange offer,
then the amount of those transfer taxes, whether imposed on the registered
holder or any other person, will be payable by the tendering holder.
ACCOUNTING TREATMENT
For accounting purposes, we will recognize no gain or loss as a result of
the exchange offer. The expenses of the exchange offer will be amortized as
additional interest expense over the remaining terms of the notes.
RESALE OF NEW NOTES
We are making the exchange offer in reliance on the position of the SEC
staff's Exxon Capital no-action letter, Morgan Stanley no-action letter,
Shearman & Sterling no-action letter and other interpretive letters addressed to
third parties in other transactions; however, we have not sought our own
interpretive letter addressing these matters and we cannot assure you that the
staff of the SEC would make a similar determination with respect to the exchange
offer as it has in these interpretive letters to third parties. Based on these
interpretations by the staff, and subject to the two immediately following
sentences, we believe that unless you are a broker-dealer, you may offer for
resale, resell or otherwise transfer new notes issued to you in this exchange
offer in exchange for initial notes without further compliance with the
registration and prospectus delivery requirements of the Securities Act,
provided that you acquire the new notes in the ordinary course of your business
and you are not participating, and have no arrangement or understanding with any
person to participate, in a distribution within the meaning of the Securities
Act of new notes. Notwithstanding the above, you may be subject to separate
restrictions if you:
- are our "affiliate" within the meaning of Rule 405 under the Securities
Act;
- do not acquire the new notes in the ordinary course of your business;
- intend to participate in the exchange offer for the purpose of
distributing new notes; or
- are a broker-dealer who purchased initial notes directly from us.
If you fall into any of the categories above, you:
- will not be able to rely on the interpretations of the SEC staff described
in the above-mentioned interpretive letters, will not be permitted or
entitled to tender your initial notes in the exchange offer, and
- must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any sale or other transfer of your
initial notes unless the sale is made pursuant to an exemption from these
requirements.
In addition, as described below, if you are a broker-dealer holding initial
notes acquired for your own account, you may be deemed a statutory "underwriter"
within the meaning of the Securities Act and must deliver a prospectus meeting
the requirements of the Securities Act in connection with any resales of your
new notes. As a condition to your participation in the exchange offer, each
holder of
29
initial notes, must furnish, upon our request, prior to the consummation of the
exchange offer, a written representation to us contained in the letter of
transmittal to the effect that:
- you are not our "affiliate";
- any new notes to be received by you are being acquired in the ordinary
course of your business; and
- you are not engaged in, do not intend to engage in, and have no
arrangement or understanding with any person to participate in, a
distribution within the meaning of the Securities Act of those new notes.
If you are a broker-dealer receiving new notes for your own account in the
exchange offer, you must acknowledge that you acquired the initial notes for
your own account as a result of market-making activities or other trading
activities, and not directly from us, and must agree that you will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of those new notes. The letter of transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of new notes received in
exchange for initial notes where the initial notes were acquired by the broker-
dealer for its own account as a result of market-making or other trading
activities. We will make this prospectus available to any broker-dealer for use
in connection with resales of new notes for a period of 90 days after the
consummation of the exchange offer.
CONSEQUENCES OF FAILURE TO EXCHANGE
Any initial notes tendered and exchanged in the exchange offer will reduce
the aggregate principal amount of initial notes outstanding. Following the
consummation of the exchange offer, holders who did not tender their initial
notes generally will not have any further registration rights under the
registration rights agreement, and their initial notes will continue to be
subject to restrictions on transfer. Accordingly, the liquidity of the market
for the initial notes could be adversely affected. Because we anticipate that
most holders will elect to exchange initial notes for new notes in the exchange
offer due to the absence of restrictions on the resale of new notes (except for
applicable restrictions on any holder of new notes who is our affiliate or is a
broker-dealer that acquired the initial notes directly from us) under the
Securities Act, we anticipate that the liquidity of the market for any initial
notes remaining after the consummation of the exchange offer may be
substantially limited.
By making this exchange offer, we will have fulfilled most of our
obligations under the registration rights agreement, and holders who do not
tender their initial notes, except for certain instances involving the initial
purchasers or holders of initial notes who are not eligible to participate in
the exchange offer, will not have any further registration rights under the
registration rights agreement or otherwise or rights to receive additional
interest for failure to register. Accordingly, any holder that does not exchange
its initial notes for new notes will continue to hold the untendered initial
notes and will be entitled to all the rights and subject to all the limitations
applicable under the indenture, except to the extent that such rights or
limitations, by their terms, terminate or cease to have further effectiveness as
a result of the exchange offer.
The initial notes that are not exchanged for new notes in the exchange offer
will remain restricted securities within the meaning of the Securities Act.
Accordingly, those initial notes may be resold only:
- to us;
- pursuant to a registration statement that has been declared effective
under the Securities Act;
30
- for so long as the initial notes are eligible for resale under Rule 144A,
to a person the holder of the initial notes reasonably believes is a
"qualified institutional buyer," as defined in Rule 144A, that is
purchasing for its own account or for the account of a qualified
institutional buyer to whom notice is given that the transfer is being
made in reliance on Rule 144A;
- pursuant to offers and sales that occur outside the United States within
the meaning of Regulation S under the Securities Act;
- to an "accredited investor," within the meaning of Rule 501(a)(1), (2),
(3) or (7) under the Securities Act that is an institutional investor
(referred to as an "institutional accredited investor") purchasing for its
own account or for the account of an institutional accredited investor, in
each case in a minimum principal amount of the initial notes of $250,000;
or
- pursuant to any other available exemption from the registration
requirements of the Securities Act, subject in each of the above cases to
any requirement of law that the disposition of a holder's property or the
property of an investor account or accounts be at all times within its or
their control.
Each accredited investor that is not a qualified institutional buyer and
that is an original purchaser of any of the initial notes from the initial
purchasers will be required to sign a letter confirming that such person is an
accredited investor under the Securities Act and that such person acknowledges
the transfer restrictions summarized above.
OTHER
Participation in the exchange offer is voluntary and you should carefully
consider whether to accept the offer to exchange your initial notes. You are
urged to consult your financial and tax advisors in making your decision on what
action to take with respect to the exchange offer. We may in the future seek to
acquire untendered initial notes in open market or privately negotiated
transactions, through subsequent exchange offers or otherwise. We have no
present plans to acquire any initial notes that are not tendered in the exchange
offer or to file a registration statement to permit resales of any untendered
initial notes.
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DESCRIPTION OF THE NEW NOTES
We are offering, in exchange for the initial notes, $300,000,000 principal
amount of 6.375% Senior Notes Due 2004, $750,000,000 principal amount of 7.625%
Senior Notes Due 2008 and $700,000,000 principal amount of 9.00% Senior Notes
due 2031. The initial notes were issued under a document called the "indenture."
The indenture is a contract between us and The Chase Manhattan Bank, which acts
as trustee. The new notes will be governed by the same indenture that governs
the initial notes.
This Description of the New Notes is intended to be a useful overview of the
material provisions of the new notes and the indenture. As this Description of
the New Notes is only a summary, you should refer to the indenture for a
complete description of our obligations and your rights. We filed a copy of the
indenture with the SEC as Exhibit 4.1 to our Current Report on Form 8-K filed on
August 22, 2001. The indenture is subject to and governed by the Trust Indenture
Act of 1939.
In this section, "we," "our," "us" and "Citizens" mean Citizens
Communications Company excluding, unless the context otherwise requires or as
otherwise expressly stated, our subsidiaries.
GENERAL TERMS OF THE INDENTURE
The following is a summary of the material terms of the notes we may issue
under the indenture. You should also read the indenture governing the notes. All
capitalized terms have the meanings specified in the indenture.
TERMS OF THE NOTES
- The senior notes due 2004 will mature on August 15, 2004 and will bear
interest at a rate of 6.375% per annum.
- The senior notes due 2008 will mature on August 15, 2008 and will bear
interest at a rate of 7.625% per annum.
- The senior notes due 2031 will mature on August 15, 2031 and will bear
interest at a rate of 9.00% per annum.
The notes will bear interest from August 16, 2001, payable on February 15
and August 15 of each year, commencing February 15, 2002, to the persons in
whose names the notes are registered on the preceding February 1 and August 1,
respectively. The notes will be senior unsecured obligations and will be issued
in denominations of $1,000 and multiples of $1,000.
We will pay principal and interest on the notes, register the transfer of
the notes and exchange the notes at our office or agency maintained for that
purpose, which initially will be the corporate trust office of the trustee
located at 450 W. 33rd Street, New York, New York 10001, Attention:
Institutional Trust Services. So long as the notes are represented by global
notes, the interest payable on the notes will be paid to Cede & Co, the nominee
of the depositary, or its registered assigns as the registered owner of such
global notes, by wire transfer of immediately available funds on each of the
applicable interest payment dates. If any of the notes are no longer represented
by a global note, we have the option to pay interest by check mailed to the
address of the person entitled to the interest. No service charge will be made
for any transfer or exchange of notes, but we may require payment of a sum
sufficient to cover any tax or other governmental charge payable. The notes are
not subject to a sinking fund or to redemption or repurchase by us at the option
of the holders.
The notes will be unsecured and unsubordinated indebtedness of Citizens and
will rank equally with all other existing and future unsecured and
unsubordinated indebtedness of Citizens. The indenture contains no limitations
on the issuance of additional indebtedness that could rank senior to, or equal
with, the notes. The notes will effectively rank junior to any future secured
indebtedness of
32
Citizens to the extent of the assets securing such indebtedness and to all
indebtedness and other liabilities of its subsidiaries, including trade
payables.
At September 30, 2001, we had $6,399.6 million in long-term debt. Of our
total indebtedness $1,104.1 million was at the subsidiary level and will be
structurally senior to the notes. Included in the subsidiary debt, at
September 30, 2001, was $131.5 million of secured indebtedness. The remaining
long-term debt is pari passu with the notes.
Citizens may, without the consent of the holders of notes, issue additional
notes having the same ranking, interest rate, maturity and other terms as the
notes. We may from time to time without the consent of holders of notes of any
series create and issue further notes having the same terms and conditions as
such notes so that the further issue is consolidated and forms a single series
with that series of notes.
OPTIONAL REDEMPTION
The notes are redeemable at our election, in whole or in part, at any time
at a redemption price equal to the greater of:
- 100% of the principal amount of the notes to be redeemed then outstanding;
or
- as determined by an Independent Investment Banker, the sum of the present
values of the remaining scheduled payments of principal and interest on
the notes to be redeemed (not including any portion of such payments of
interest accrued to the date of redemption) discounted to the redemption
date on a semiannual basis (assuming a 360-day year consisting of twelve
30-day months) at the Adjusted Treasury Rate, plus 25 basis points, in the
case of the notes due 2004, plus 35 basis points, in the case of the notes
due 2008, and 50 basis points, in the case of the notes due 2031,
plus, in either of the above cases, accrued and unpaid interest to the date of
redemption on the notes to be redeemed.
"Adjusted Treasury Rate" means, with respect to any redemption date:
- the yield, under the heading represents the average for the immediately
preceding week, appearing in the most recently published statistical
release designated "H.15(519)" or any successor publication is published
weekly by the Board of Governors of the Federal Reserve System and
establishes yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption "Treasury Constant
Maturities," for the maturity corresponding to the Comparable Treasury
Issue (if no maturity is within three months before or after the Remaining
Life, yields for the two published maturities most closely corresponding
to the Comparable Treasury Issue shall be determined and the Adjusted
Treasury Rate shall be interpolated or extrapolated from such yields on a
straight line basis, rounding to the nearest month); or
- if such release (or any successor release) is not published during the
week preceding the calculation date or does not contain such yields, the
rate per annum equal to the semi-annual equivalent yield to maturity of
the Comparable Treasury Issue, calculated using a price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount) equal
to the Comparable Treasury Price for such redemption date. The Adjusted
Treasury Rate shall be calculated on the third Business Day preceding the
redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the notes to be redeemed that would be utilized, at the
time of selection and in accordance with customary financial
33
practice in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of such securities ("Remaining Life").
"Comparable Treasury Price" means (1) the average of five Reference Treasury
Dealer Quotations for such redemption date, after excluding the highest and
lowest Reference Treasury Dealer Quotations, or (2) if the Independent
Investment Banker obtains fewer than five such Reference Treasury Dealer
Quotations the average of all such quotations.
"Independent Investment Banker" means one of the Reference Treasury Dealers
appointed by us.
"Reference Treasury Dealer" means:
- each of Morgan Stanley & Co. Incorporated and J.P. Morgan Securities Inc.
and their respective successors; provided, however, that if any of the
foregoing shall cease to be a primary U.S. Government securities dealer in
New York City (a "Primary Treasury Dealer"), we shall substitute another
Primary Treasury Dealer; and
- any other Primary Treasury Dealer selected by us.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by the
Independent Investment Banker, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to the Independent Investment Banker at 5:00 p.m., New York
City time, on the third Business Day preceding such redemption date.
We will mail a notice of redemption at least 30 days but not more than
60 days before the redemption date to each holder of the securities to be
redeemed.
Unless we default in payment of the redemption price, on and after the
redemption date, interest will cease to accrue on the notes or portions thereof
called for redemption.
COVENANTS
MERGER, CONSOLIDATION AND SALE OF ASSETS
The indenture provides that the Company may not consolidate or merge with or
into, or sell, lease or convey all or substantially all of its assets in any one
transaction or series of transactions to any other corporation, unless:
(1) the resulting, surviving or transferee corporation (the "successor") is
either the Company or is a corporation organized under the laws of the United
States, any state or the District of Columbia and expressly assumes by
supplemental indenture all of the Company's obligations under the indenture and
the notes; and
(2) immediately after giving effect to the transaction no Event of Default
or event which with notice or lapse of time would be an Event of Default has
occurred and is continuing.
The successor will be substituted for the Company in the indenture with the
same effect as if it had been an original party to the indenture. Thereafter,
the successor may exercise the rights and powers of the Company under the
indenture. This provision does not apply to the disposition of any or all of the
assets that are identified in our June 30, 2001 financial statements as
discontinued operations or assets held for sale or of ELI.
LIMITATION ON LIENS
A lien means, with respect to any property or assets, including capital
stock, any:
- mortgage or deed of trust;
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- pledge;
- lien;
- hypothecation;
- assignment;
- deposit arrangement;
- security interest;
- charge;
- easement or zoning restriction that materially impairs usefulness or
marketability;
- encumbrance;
- security agreement;
- Capital Lease Obligation;
- conditional sale;
- any "sale and leaseback transaction," which is any direct or indirect
arrangement whereby we or a Restricted Subsidiary would sell or transfer
and then we or a Restricted Subsidiary would lease back property from the
purchaser or transferee; or
- any other agreement that has the same economic effect as any of the above.
Under the indenture, we may not, and we may not allow our Restricted
Subsidiaries to, allow any lien on any of our property or assets (which includes
capital stock), unless the lien secures your notes equally and ratably with, or
prior to, any other indebtedness secured by such lien, subject to certain
exceptions described below. The indenture excepts from this limitation secured
debt which we or our Restricted Subsidiaries may issue, assume, guarantee or
permit to exist up to 10% of the value of the consolidated total assets of
Citizens as shown on, or computed from, the most recent quarterly or annual
balance sheet filed by Citizens with the Securities and Exchange Commission. In
addition, this restriction will not take into account or apply to:
(1) liens securing indebtedness and other obligations under our senior bank
financing and senior bank financing of Restricted Subsidiaries, including
guarantees of indebtedness and other obligations under such senior bank
financings, in an amount of up to 20% of the sum of the total consolidated
current assets and net property, plant and equipment of Citizens as shown on, or
computed from, the most recent quarterly or annual balance sheet filed by
Citizens with the Securities and Exchange Commission;
(2) liens existing at the date of the indenture;
(3) liens on property that exist when we acquire the property and liens that
secure payment of the purchase price of the property;
(4) liens that secure debt that a Restricted Subsidiary owes to us or to
another Restricted Subsidiary;
(5) liens on property, shares of stock or indebtedness of any entity that
exists when (a) it becomes a Restricted Subsidiary, (b) is merged into or
consolidated with us or a Restricted Subsidiary, or (c) we
35
or a Restricted Subsidiary acquires all or substantially all of the assets of
the entity, provided that no such lien extends to any other property of us or a
Restricted Subsidiary;
(6) liens on property to secure debt incurred for development or improvement
of the property;
(7) liens securing (a) nondelinquent performance of bids or contracts (other
than for borrowed money, obtaining of advances or credit or the securing of
debt), (b) contingent obligations on surety and appeal bonds and (c) other
similar nondelinquent obligations, in each case incurred in the ordinary course
of business;
(8) liens securing Capital Lease Obligations, provided that (a) any such
lien attaches to the property within 270 days after the acquisition thereof and
(b) such lien attaches solely to the property so acquired;
(9) liens arising solely by virtue of any statutory or common law provision
relating to banker's liens, rights of set-off or similar rights and remedies as
to deposit account or other funds, provided that such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against our
access in excess of those set forth by regulations promulgated by the Federal
Reserve Board and such deposit account is not intended by us to provide
collateral to the depository institution;
(10) pledges or deposits under worker's compensation laws, unemployment
insurance laws or similar legislation;
(11) statutory and tax liens for sums not yet due or delinquent or which are
being contested or appealed in good faith by appropriate proceedings;
(12) liens arising solely by operation of law and in the ordinary course of
business, such as mechanics', materialmen's, warehousemen's and carriers' liens
and liens of landlords or of mortgages of landlords on fixtures and movable
property located on premises leased in the ordinary course of business;
(13) liens on personal property (other than shares or debt of Restricted
Subsidiaries) securing loans maturing in not more than one year or on accounts
receivables in connection with a receivables financing program;
(14) liens securing financings in amounts up to the value of assets,
businesses and properties acquired after the date of the indenture; or any lien
upon any property to secure all or part of the cost of construction thereof or
to secure debt incurred prior to, at the time of, or within twelve months after
completion of such construction or the commencement of full operations thereof
(whichever is later), to provide funds for such purpose; or
(15) extensions, renewals or replacement of any of the liens described
above, if limited to all or any part of the same property securing the original
lien.
"Capital Lease Obligations" means indebtedness represented by obligations
under a lease that is required to be capitalized for financial reporting
purposes in accordance with generally accepted accounting principles. The amount
of indebtedness will be the capitalized amount of the obligations determined in
accordance with generally accepted accounting principles consistently applied.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Restricted Subsidiary" means, as of the date hereof, all Subsidiaries of
the Company.
36
"Subsidiary" means any corporation, association, partnership, joint venture,
limited liability company or other business entity of which more than 50% of the
total voting power of the equity interests (including joint venture interests)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof or any partnership of which
more than 50% of the partners' equity interests (considering all partners'
equity interests as a single class) is, in each case, at the time owned or
controlled directly or indirectly, by the Company or one or more of the
Subsidiaries of the Company or any combination thereof.
"Unrestricted Subsidiary" means every Subsidiary of the Company that is not
a Restricted Subsidiary.
The board of directors of the Company may re-designate any Restricted
Subsidiary to be an Unrestricted Subsidiary; provided that immediately after
giving effect to such re-designation, no Default or Event of Default shall have
occurred and be continuing or would occur as a consequence thereof.
EVENTS OF DEFAULT
The term "Event of Default," means any of the following:
- failure to pay interest for 60 days after the date payment is due and
payable; provided that if we extend an interest payment period in
accordance with the terms of the notes, the extension will not be a
failure to pay interest;
- failure to pay principal or premium, if any, on any note when due, at
maturity, upon any redemption, by declaration or otherwise;
- failure to make sinking fund payments when due;
- failure to perform other covenants for 90 days after notice that
performance was required; or
- events in bankruptcy, insolvency or reorganization of the Company.
An Event of Default for a particular series of notes does not necessarily
constitute an Event of Default for any other series of notes issued under the
indenture. If an Event of Default relating to the payment of interest, principal
or any sinking fund installment involving any series of notes has occurred and
is continuing, the trustee or the holders of not less than 25% in aggregate
principal amount of the notes of each affected series may declare the entire
principal of all the notes of that series to be due and payable immediately.
If an Event of Default relating to the performance of other covenants occurs
and is continuing for a period of 60 days after notice of that event, or if any
other Event of Default occurs and is continuing involving all of notes, then the
trustee or the holders of not less than 25% in aggregate principal amount of all
of the series of notes may declare the entire principal amount of all of the
notes due and payable immediately.
If, however, the Event of Default relating to the performance of other
covenants or any other Event of Default that has occurred and is continuing is
for less than all of the series of notes then, the trustee or the holders of not
less than 25% in aggregate principal amount of each affected series of the notes
may declare the entire principal amount of all notes of the affected series due
and payable immediately. The holders of not less than a majority, or any
applicable supermajority, in aggregate principal amount of the notes of a series
may, after satisfying conditions, rescind and annul any of the above-described
declarations and consequences involving the series.
If an Event of Default relating to events in bankruptcy, insolvency or
reorganization of our Company occurs and is continuing, then the principal
amount of all of the notes, and any accrued interest, will automatically become
due and payable immediately, without any declaration or other act by the trustee
or any holder.
37
The indenture imposes limitations on suits brought by holders of notes
against us. Except for actions for payment of overdue principal or interest, no
holder of notes of any series may institute any action against us under the
indenture unless:
- the holder has previously given to the trustee written notice of default
and continuance of such default;
- the holders of at least 25% in principal amount of the outstanding notes
of the affected series have requested that the trustee institute the
action;
- the requesting holders have offered the trustee reasonable indemnity for
expenses and liabilities that may be incurred by bringing the action;
- the trustee has not instituted the action within 60 days of the request;
and
- the trustee has not received inconsistent direction by the holders of a
majority in principal amount of the outstanding notes of the series.
We will be required to file annually with each trustee a certificate, signed
by an officer of our company, stating whether or not the officer knows of any
default by us in the performance, observance or fulfillment of any condition or
covenant of the indenture.
DISCHARGE, DEFEASANCE, AND COVENANT DEFEASANCE
Citizens may elect either:
(a) to defease and be discharged from any and all obligations with respect
to the notes; or
(b) to be released from its obligations described above under "Merger,
Consolidation and Sale of Assets" and "Limitation on Liens" with respect to the
notes, only:
(1) upon the deposit with The Chase Manhattan Bank, in trust, of money
and/or U.S. government obligations, which through the payment of interest
and principal of the U.S. government obligations in accordance with their
terms will provide money in an amount sufficient to pay any installment of
principal and premium, if any and interest on the notes on the stated
maturity of the payments in accordance with the terms of the indenture and
the notes:
(2) upon delivery to The Chase Manhattan Bank by Citizens of an opinion
of counsel to the effect that the deposit and related defeasance or release
will not cause the holders of the notes to recognize income, gain or loss
for federal income tax purposes;
(3) at the time of defeasance or release no Event of Default will have
happened or be continuing;
(4) if such legal defeasance or covenant defeasance will not result in a
breach or violation of, or constitute a default under, any material
agreement to which we are a party;
(5) if such defeasance is not made with the intent of preferring the
noteholders over other creditors of Citizens, or with the intent of
defeating, hindering, delaying or defrauding creditors of Citizens or
others; and
(6) upon delivery to The Chase Manhattan Bank by Citizens of an
officers' certificate stating that the conditions precedent for a defeasance
have been met and an opinion of counsel stating that the conditions
precedent for a defeasance described in clause (2) above has been met.
Although Citizens may discharge or decrease its obligations under the
indenture as described in the two preceding paragraphs, it may not avoid, among
other things, its duty to register the transfer or exchange of any series of
notes, to replace any temporary, mutilated, destroyed, lost or stolen series of
notes or to maintain an office or agency in respect of any series of notes.
38
MODIFICATION OF THE INDENTURE
The indenture provides that we and the trustee may enter into supplemental
indentures without the consent of the holders of notes to:
- secure any notes;
- evidence the assumption by a successor corporation of our obligations;
- add to the covenants of Citizens for the benefit of the holders or
surrender any right or power conferred upon Citizens;
- cure any ambiguity or correct any inconsistency in the relevant indenture;
- comply with any requirement of the Securities and Exchange Commission in
connection with the qualification of the indenture under the Trust
Indenture Act;
- evidence and provide for the acceptance of appointment by a successor
trustee.
In addition, the indenture provides that we and the trustee may enter into
supplemental indentures with the consent of the holders of not less than a
majority in aggregate in principal amount of all the notes then outstanding and
affected under the indenture voting as one class, to add any provisions to, or
change in any manner, eliminate or modify in any way the provisions of the
indenture or modify in any manner the rights of the holders of the notes.
However, without the consent of each holder of each outstanding note affected,
no amendment may, among other things:
- extend the final maturity of any note;
- reduce the principal amount;
- reduce the rate or extend the time of payment of interest;
- reduce any amount payable on redemption;
- change the currency in which the principal, unless otherwise provided for
a series, premium, if any, or interest is payable;
- reduce the amount of the principal of any note issued with an original
issue discount that is payable upon acceleration or provable in
bankruptcy;
- impair the right to institute suit for the enforcement of any payment on
any note when due; or
- reduce the percentage of holders of notes of any series whose consent is
required for any modification of the indenture.
The consent of the holders is not necessary under the indenture to approve
the particular form of any proposed amendment which requires the consent of
holders. It is sufficient if such consent approves the substance of the proposed
amendment. After an amendment under the indenture becomes effective, Citizens is
required to mail to the holders a notice briefly describing such amendment.
However, the failure to give such notice to all the holders, or any defect
therein, will not impair or affect the validity of the amendment.
CONCERNING THE TRUSTEE
The Chase Manhattan Bank is the trustee under the indenture with respect to
each of the series of the notes and has been appointed by Citizens as registrar
and paying agent with regard to the notes.
The trustee may resign or be removed from one or more series of notes. All
payments of principal of, premium, if any, and interest on, and all
registration, transfer, exchange, authentication and delivery of, the notes will
be effected by the trustee at an office designated by it in New York, New York.
39
If the trustee becomes a creditor of the Company, the indenture places
limitations on the right of the trustee to obtain payment of claims or to
realize on property received in respect of any such claim as security otherwise.
The trustee may engage in other transactions. If it acquires any conflicting
interest relating to any duties concerning the notes, however, it must eliminate
the conflict or resign as trustee.
The holders of a majority in aggregate principal amount of any series of
notes then outstanding will have the right to direct the time, method and place
of conducting any proceeding for exercising any remedy available to the trustee
concerning the applicable series of notes, provided that the direction:
- would not conflict with any rule of law or with the indenture;
- would not be unduly prejudicial to the rights of another holder of the
notes; and
- would not involve the trustee in personal liability.
The indenture provides that in case an Event of Default shall occur, not be
cured and be known to the trustee, the trustee must use the same degree of care
as a prudent person would use in the conduct of his or her own affairs in the
exercise of the trustee's power. No trustee will be under any obligation to
exercise any of its rights or powers under the indenture at the request of any
of the holders of the notes, unless the holders shall have offered to the
trustee security and indemnity satisfactory to that trustee.
GOVERNING LAW
The indenture provides that it and the notes will be governed by, and
construed in accordance with, the laws of the State of New York.
BOOK-ENTRY SYSTEM
We will initially issue the new notes in the form of one or more global
notes. The global notes will be deposited with, or on behalf of, DTC and
registered in the name of DTC or its nominee. Except as set forth below, the
global notes may be transferred only as a whole to DTC or another nominee of
DTC. You may hold your beneficial interests in the global notes directly through
DTC if you have an account with DTC or indirectly through organizations that
have accounts with DTC.
DTC has advised us that it is:
- a limited purpose trust company organized under the laws of the State of
New York;
- a "banking organization" within the meaning of the New York Banking Law; a
member of the Federal Reserve System;
- a "clearing corporation" within the meaning of the Uniform Commercial
Code, as amended; and
- a "clearing agency" registered under Section 17A of the Securities
Exchange Act.
DTC was created to hold securities for its participants and facilitates the
clearance and settlement of securities transactions between its participants
through electronic book-entry changes to the accounts of its participants, which
eliminates the need for physical transfer and delivery of certificates. DTC's
participants include securities brokers and dealers, including the initial
purchasers of the initial notes; banks and trust companies; clearing
corporations and some other organizations. Indirect access to DTC's system is
also available to other entities such as banks, brokers, dealers and trust
companies. These indirect participants clear through or maintain a custodial
relationship with a participant in DTC, either directly or indirectly. Investors
who are not DTC participants may beneficially own securities held by or on
behalf of DTC only through participants or indirect participants in DTC.
We expect that under the procedures established by DTC:
- upon deposit of each global note, DTC will credit the accounts of
participants in DTC with an interest in the global note; and
40
- ownership of the notes will be shown on, and the transfer of ownership of
the notes will be effected only through, records maintained by DTC, with
respect to the interests of participants in DTC, and the records of
participants and indirect participants, with respect to the interests of
persons other than participants in DTC.
The laws of some jurisdictions may require that some purchasers of
securities take physical delivery of the securities in definitive form.
Accordingly, the ability to transfer interests in the new notes represented by a
global note to these persons may be limited. In addition, because DTC can act
only on behalf of its participants, who in turn act on behalf of persons who
hold interests through participants, the ability of a person having an interest
in the new notes represented by a global note to pledge or transfer that
interest to persons or entities that do not participate in DTC's system, or to
otherwise take actions in respect of that interest, may be affected by the lack
of a physical definitive security in respect of the interest.
So long as DTC or its nominee is the registered owner of a global note, DTC
or the nominee, as the case may be, will be considered the sole owner or holder
of the new notes represented by the global note for all purposes under the
indenture. Except as provided below, owners of beneficial interests in a global
note:
- will not be entitled to have notes represented by the global note
registered in their names;
- will not receive or be entitled to receive physical delivery of
certificated notes; and
- will not be considered the owners or holders of the new notes under the
indenture for any purpose, including with respect to the giving of any
direction, instruction or approval to the trustee under the indenture.
Accordingly, each holder owning a beneficial interest in a global note must
rely on the procedures of DTC and, if the holder is not a participant or an
indirect participant in DTC, on the procedures of the DTC participant through
which the holder owns its interest, to exercise any rights of a holder of new
notes under the indenture or the global note. We understand that under existing
industry practice, if we request any action of holders of new notes, or a holder
that is an owner of a beneficial interest in a global note desires to take any
action that DTC, as the holder of the global note, is entitled to take, then DTC
would authorize its participants to take the action and the participants would
authorize holders owning through participants to take the action or would
otherwise act upon the instruction of those holders. Neither we nor the trustee
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of new notes by DTC, or for maintaining,
supervising or reviewing any records of DTC relating to the new notes.
Payments with respect to the principal of, premium, if any, and interest on,
any new notes represented by a global note registered in the name of DTC or its
nominee on the applicable record date will be payable by the trustee to or at
the direction of DTC or its nominee in its capacity as the registered holder of
the global note representing those new notes under the indenture. Under the
terms of the indenture, we and the trustee may treat the persons in whose names
the new notes, including the global notes, are registered as the owners of the
new notes for the purpose of receiving payment on the new notes and for any and
all other purposes whatsoever. Accordingly, neither we nor the trustee has or
will have any responsibility or liability for the payment of amounts to owners
of beneficial interests in a global note, including principal, premium, if any,
liquidated damages, if any, and interest. Payments by the participants and the
indirect participants in DTC to the owners of beneficial interests in a global
note will be governed by standing instructions and customary industry practice
and will be the responsibility of the participants or the indirect participants
and DTC.
Transfers between participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds. Transfers between
participants in Euroclear or Clearstream will be effected in the ordinary way
according to their respective rules and operating procedures.
41
Cross-market transfers between the participants in DTC, on the one hand, and
Euroclear or Clearstream participants, on the other hand, will be effected
through DTC in accordance with DTC's rules on behalf of Euroclear or
Clearstream, as the case may be, by its respective depositary. These cross-
market transactions, however, will require delivery of instructions to Euroclear
or Clearstream, as the case may be, by the counterparty in that system in
accordance with the rules and procedures and within the established deadlines,
Brussels time, of that system. If the transaction meets its settlement
requirements, Euroclear or Clearstream, as the case may be, will deliver
instructions to its respective depositary to take action to effect final
settlement on its behalf by delivering or receiving interests in the relevant
global notes in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Euroclear
participants and Clearstream participants may not deliver instructions directly
to the depositaries for Euroclear or Clearstream.
Because of time zone differences, the securities account of a Euroclear or
Clearstream participant purchasing an interest in a global note from a
participant in DTC will be credited, and any crediting will be reported to the
relevant Euroclear or Clearstream participant, during the securities settlement
processing day, which must be a business day for Euroclear and Clearstream,
immediately following the settlement date of DTC. Cash received in Euroclear or
Clearstream as a result of sales of interest in a global note by or through a
Euroclear or Clearstream participant to a participant in DTC will be received
with value on the settlement date of DTC but will be available in the relevant
Euroclear or Clearstream cash account only as of the business day for Euroclear
or Clearstream following DTC's settlement date.
Although DTC, Euroclear and Clearstream have agreed to the above procedures
to facilitate transfers of interests in the global notes among participants in
DTC, Euroclear and Clearstream, they are under no obligation to perform or to
continue to perform the procedures, and the procedures may be discontinued at
any time. Neither we nor the trustee will have any responsibility for the
performance by DTC, Euroclear or Clearstream or their respective participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
CERTIFICATED NOTES
If:
- DTC notifies us that it is at any time unwilling or unable to continue as
a depositary or DTC ceases to be registered as a clearing agency under the
Securities Exchange Act and a successor depositary is not appointed within
90 days of such notice or cessation;
- we, at our option, notify the trustee in writing that we elect to cause
the issuance of notes in definitive form under the indenture; or
- upon the occurrence of some other events as provided in the indenture;
then, upon surrender by DTC of the global notes, certificated notes will be
issued to each person that DTC identifies as the beneficial owner of the new
notes represented by the global notes. Upon the issuance of certificated notes,
the trustee is required to register the certificated notes in the name of that
person or persons, or their nominee, and cause the certificated notes to be
delivered thereto. Neither we nor the trustee will be liable for any delay by
DTC or any participant or indirect participant in DTC in identifying the
beneficial owners of the related new notes and each of those persons may
conclusively rely on, and will be protected in relying on, instructions from DTC
for all purposes, including with respect to the registration and delivery, and
the respective principal amounts, of the new notes to be issued.
42
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of material federal income tax
consequences of the exchange of the initial notes for the new notes. This
discussion is based upon laws, regulations, rulings and decisions currently in
effect, all of which are subject to change, retroactively or prospectively.
This discussion pertains only to new notes and initial notes held as capital
assets within the meaning of Section 1221 of the Internal Revenue Code of 1986,
as amended (the "Code"). This summary applies only to a beneficial owner of a
new note who acquires a new note in exchange for an initial note in the exchange
offer and may not apply to certain categories of investors subject to special
treatment under the Code, such as banks, thrift institutions, real estate
investment trusts, regulated investment companies, other financial institutions,
insurance companies, dealers in securities or currencies, pension plans, tax
exempt organizations, persons that are passthrough entities or investors in
passthrough entities, traders in securities that elect to use a mark-to-market
method of accounting for their securities holdings, persons liable for the
alternative minimum tax, holders of new notes whose "functional currency" is not
the U.S. dollar and persons who have acquired new notes as part of a straddle,
hedge, conversion or constructive sale transaction or other risk reduction
transaction or other integrated investment. Moreover, this discussion summarizes
only federal income tax consequences and does not address any other federal tax
consequences or any state, local or other tax consequences. Controversy and
uncertainty exist in many areas of the federal income tax law that may affect an
investment in the notes. Moreover, we will not seek any ruling from the IRS
regarding the exchange offer. Accordingly, there can be no assurance that some
of the views expressed herein will not be challenged by the IRS.
Accordingly, holders of the initial notes are urged to consult, and must
depend upon their own tax advisors to determine the specific tax consequences of
exchanging initial notes for new notes to them, including the applicability and
effect of any federal, state, local or other tax consequences, including any tax
return filing or other tax reporting requirements.
If a partnership holds the new notes, the tax treatment of a partner will
generally depend on the status of the partner and the activities of the
partnership. If you are a partner of a partnership holding the new notes, you
should consult your tax advisors.
TAX CONSEQUENCES OF THE EXCHANGE
The exchange of initial notes for new notes in the exchange offer will not
be treated as an "exchange" for federal income tax purposes because the new
notes do not differ materially in kind or extent from the initial notes.
Instead, the new notes will be treated as a continuation of the initial notes.
Accordingly, an exchanging beneficial owner of an initial note:
- will not recognize taxable gain or loss on the exchange;
- will have a holding period for the new note that includes the holding
period of the initial note exchanged therefor;
- will have an adjusted tax basis in the new note equal to its adjusted tax
basis in the initial note exchanged therefor; and
- will experience tax consequences upon a subsequent sale, exchange,
redemption or retirement of a new note similar to the tax consequences
with respect to a sale, exchange, redemption or retirement of an initial
note.
The exchange offer is not expected to result in any United States federal income
tax consequences to a non-exchanging beneficial owner of an initial note.
43
PLAN OF DISTRIBUTION
Each broker-dealer that receives new notes for its own account in the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of new notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of new notes received in exchange for initial notes where the
initial notes were acquired as a result of market-making activities or other
trading activities. We have agreed that, for a period of 180 days after the
expiration date of the exchange offer, we will make this prospectus, as amended
or supplemented, available to any broker-dealer for use in connection with any
resale of new notes.
We will not receive any proceeds from any sale of new notes by
broker-dealers. New notes received by broker-dealers for their own account in
the exchange offer may be sold from time to time in one or more transactions in
the over-the-counter market, in negotiated transactions, through the writing of
options on the new notes or a combination of these methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or at negotiated prices. Any resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any broker-dealer or the purchasers
of any new notes. Any broker-dealer that resells new notes that were received by
it for its own account in the exchange offer and any broker or dealer that
participates in a distribution of those new notes may be deemed to be an
"underwriter" within the meaning of the Securities Act, and any profit on any
resale of new notes and any commission or concessions received by any of those
persons may be deemed to be underwriting compensation under the Securities Act.
The letter of transmittal states that, by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of 90 days after the consummation of the exchange offer, we
will promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests those documents
in the letter of transmittal. We have agreed to pay all expenses incident to the
exchange offer (including the expenses of one counsel for the holders of the
initial notes) other than commissions or concessions of any broker-dealers and
will indemnify the holders of the initial notes (including any broker-dealers)
against certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the new notes will be passed upon for us by Winston &
Strawn, New York, New York.
EXPERTS
Our consolidated financial statements as of December 31, 2000 and 1999, and
for each of the years in the three-year period ended December 31, 2000,
incorporated by reference in this prospectus from our Annual Report on
Form 10-K, have been so incorporated by reference in reliance upon the report of
KPMG LLP, independent public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
The combined financial statements of the GTE Combined Entities as of
December 31, 1999 and 1998 and for each of the years in the three-year period
ended December 31, 1999, incorporated by reference in this prospectus from our
Current Report on Form 8-K filed November 14, 2000, have been so incorporated by
reference in reliance upon the report of KPMG LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
44
The financial statements of Contel of Minnesota, Inc., incorporated by
reference in this prospectus to the extent and for the periods indicated in
their reports dated January 27, 2000 and January 28, 1999 have been audited by
Arthur Andersen LLP, independent public accountants, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports.
The combined financial statements of the Frontier Incumbent Local Exchange
Carrier Businesses as of December 31, 1999 and 2000, for the year ended
December 31, 2000, the nine-month period ended September 30, 1999 and the
three-month period ended December 31, 1999, incorporated by reference in this
prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said report.
The combined financial statements of the Frontier Incumbent Local Exchange
Carrier Businesses for the year ended December 31, 1998, incorporated in this
prospectus by reference to Citizens Communications Company's Current Report on
Form 8-K dated May 7, 2001, have been so incorporated in reliance on the report
of PricewaterhouseCoopers LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934 and, in accordance therewith, file reports and other information
with the SEC. You may read and copy any document we file at the SEC's public
reference room at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of such material can also be obtained by mail
from the Public Reference Section of the Commission, at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at the prescribed rates.
Please call the SEC at 1-800-SEC-0330 for more information on their public
reference rooms and their copy charges, as well as the SEC's Public Reference
Section's charges for mailing copies of the documents we have filed. The SEC
maintains a website at http://www.sec.gov that contains reports, proxy and
information statements and other information on a delayed basis regarding
registrants, including us, that file electronically with the SEC.
Our common stock is listed on the New York Stock Exchange and any reports,
proxy and information statements and other information we file with the SEC may
also be inspected and copied at the offices of the New York Stock
Exchange, Inc., located at 20 Broad Street, New York, New York 10005.
INCORPORATION BY REFERENCE
Some of the information that you may want to consider in deciding whether to
invest in the notes is not included in this prospectus but rather is
incorporated by reference to specific reports that we have filed with the SEC.
This allows us to disclose important information to you by referring you to
those documents rather than repeating them in full in this prospectus. The
information incorporated by reference in this prospectus contains important
business and financial information. In addition, information that we file with
the SEC after the date of this prospectus automatically updates and supersedes
the information contained in this prospectus. We have previously filed the
following documents with the SEC (File No. 001-11001) and are incorporating them
by reference into this prospectus:
- Annual Report on Form 10-K of Citizens Communications Company for the year
ended December 31, 2000 and filed with the SEC on March 9, 2001;
- Quarterly Report on Form 10-Q for the nine-month period ended
September 30, 2001 of Citizens Communications Company filed with the SEC
on November 14, 2001;
45
- Quarterly Report on Form 10-Q for the six-month period ended June 30, 2001
of Citizens Communications Company filed with the SEC on August 10, 2001;
- Quarterly Report on Form 10-Q for the three-month period ended March 31,
2001 of Citizens Communications Company filed with the SEC on May 10,
2001;
- Current Report on Form 8-K of Citizens Communications Company filed with
the SEC on January 15, 2002 in respect of the completion of the sale of
our water operations to American Water Works;
- Current Report on Form 8-K/A of Citizens Communications Company filed with
the SEC on January 15, 2002 in respect of our Current Report on
Form 8-K/A filed with the SEC on December 13, 2001 and our Current Report
on Form 8-K filed with the SEC on September 17, 2001 in respect of our
revised pro forma financial information as of June 30, 2001 and for the
six months then ended and for the year ended December 31, 2000 for the
Frontier ILEC businesses acquired, the GTE businesses acquired and to be
acquired, the Qwest business acquired, and the public utilities services
dispositions;
- Current Report on Form 8-K of Citizens Communications Company filed with
the SEC on January 9, 2002 providing 2002 guidance for its rural local
exchange carrier (RLEC) and competitive local exchange carrier (CLEC)
operations;
- Current Report on Form 8-K of Citizens Communications Company filed with
the SEC on December 18, 2001 in respect of the termination of previously
pending agreements with Verizon Communications to acquire approximately
63,000 telephone access lines in Arizona and California;
- Current Report on Form 8-K of Citizens Communications Company filed with
the SEC on December 13, 2001 in respect of our pro forma financial
information as of September 30, 2001 and for the nine months then ended
and for the year ended December 31, 2000 for the Frontier ILEC Business
acquisition, the GTE businesses acquired, the Qwest business acquired and
the public utilities services dispositions;
- Current Report on Form 8-K/A of Citizens Communications Company filed with
SEC on December 13, 2001 in respect of our Current Report on Form 8-K
filed with the SEC on September 17, 2001 in respect of our revised pro
forma financial information as of June 30, 2001 and for the six months
then ended and for the year ended December 31, 2000 for the Frontier ILEC
businesses acquired, the GTE businesses acquired and to be acquired, the
Qwest business acquired, and the public utilities services dispositions;
- Current Report on Form 8-K/A of Citizens Communications Company filed with
the SEC on December 12, 2001 in respect of our Current Report on Form 8-K
filed with the SEC on June 12, 2001 in respect of our offering of equity
units;
- Current Report on Form 8-K of Citizens Communications Company filed with
the SEC on November 13, 2001 in respect of our earnings announcement for
the quarter ended September 30, 2001;
- Current Report on Form 8-K of Citizens Communications Company filed with
the SEC on September 21, 2001 announcing the receipt of California PUC
approval for the sale of our water and wastewater operations;
- Current Report on Form 8-K of Citizens Communications Company filed with
the SEC on September 17, 2001 in respect of our pro forma financial
information as of June 30, 2001 for the Frontier ILEC acquisition, the
remaining GTE acquisitions, and the public utilities services
46
dispositions; and the unaudited financial statements of the Frontier ILEC
businesses for the six months ended June 30, 2001;
- Current Report on Form 8-K of Citizens Communications Company filed with
the SEC on August 22, 2001, in respect of our offering of the initial
notes;
- Current Report on Form 8-K of Citizens Communications Company filed with
the SEC on August 15, 2001 announcing the pricing of the initial notes;
- Current Report on Form 8-K of Citizens Communications Company filed with
the SEC on August 10, 2001 in respect of our pro forma financial
information for the Frontier ILEC acquisition and Louisiana gas
disposition;
- Current Report on Form 8-K of Citizens Communications Company filed with
the SEC on August 10, 2001, in respect of our earnings announcement for
the quarter ended June 30, 2001;
- Current Report on Form 8-K of Citizens Communications Company filed with
the SEC on July 24, 2001, announcing the notice of termination of our
pending acquisition agreements with Qwest Communications
International, Inc.;
- Current Report on Form 8-K of Citizens Communications Company filed with
the SEC on July 2, 2001, announcing the completion of our acquisition of
Global Crossing's local exchange telephone business;
- Current Report on Form 8-K of Citizens Communications Company filed with
the SEC on July 2, 2001, announcing the completion of the sale of our
Louisiana gas operations to Atmos Energy Corporation for approximately
$365 million in cash;
- Current Report on Form 8-K of Citizens Communications Company filed with
the SEC on June 21, 2001 in respect of our concurrent offerings of
18,400,000 6-3/4% equity units and 25,156,250 shares of common stock;
- Current Report on Form 8-K of Citizens Communications Company filed with
the SEC on June 14, 2001 announcing the pricing of our concurrent
offerings of equity units and common stock;
- Current Report on Form 8-K of Citizens Communications Company filed with
the SEC on June 12, 2001 in respect of our offering of equity units;
- Current Report on Form 8-K of Citizens Communications Company filed with
the SEC on June 4, 2001 in respect of the announcement of our concurrent
offerings of equity units and common stock;
- Current Report on Form 8-K of Citizens Communications Company filed with
the SEC on May 24, 2001 in respect of our May 18, 2001 issuance of
$1,750 million in aggregate principal amount of notes;
- Current Report on Form 8-K of Citizens Communications Company filed with
the SEC on May 16, 2001 in respect of our offering of up to
$1,000 million in senior unsecured debt; and
- Current Report on Form 8-K of Citizens Communications Company filed with
the SEC on May 10, 2001 in respect of our earnings announcement for the
quarter ended March 31, 2001.
- Current Report on Form 8-K of Citizens Communications Company filed with
the SEC on May 7, 2001, including the audited financial statements of
selected US West exchanges as of December 31, 2000 and 1999 and for each
of the years in the three year period ended December 31, 2000 and pro
forma financial information and including audited financial statements of
the Frontier ILEC businesses as of December 31, 2000 and 1999 and for the
year
47
ended December 31, 1998, the nine-month period ended September 30, 1999
(predecessor), the three-month period ended December 31, 1999 and the year
ended December 31, 2000 and the pro forma financial information;
- Current Report on Form 8-K of Citizens Communications Company filed with
the SEC on April 27, 2001 including our press release announcing the
approval by the New York Public Service Commission of the purchase of
Global Crossing Ltd.'s local exchange carrier business (the Frontier ILEC
businesses);
- Current Report on Form 8-K of Citizens Communications Company filed with
the SEC on April 25, 2001, including our press release announcing the
approval by the Louisiana Public Service Commission on April 23, 2001 of
the sale to Atmos Energy Corporation of the LGS Natural Gas Company
Subsidiary and the Louisiana Gas Service Company division;
- Current Report on Form 8-K of Citizens Communication Company filed with
the SEC on April 4, 2001, including our press release announcing the
offering of $3.0 billion worth of debt and equity securities under a shelf
registration statement;
- Current Report on Form 8-K of Citizens Communications Company filed with
the SEC on March 29, 2001, including the audited financial statements of
selected US WEST exchanges and the Frontier ILEC businesses as of
December 31, 1999 and 1998 and for each of the years in the three-year
period ended December 31, 1999 and the unaudited financial statements for
the nine months ended September 30, 2000 and 1999 and pro forma financial
information;
- Current Report on Form 8-K of Citizens Communications Company filed with
the SEC on March 8, 2001, including our press release announcing fourth
quarter results and including our financial and operating data tables;
- Current Report on Form 8-K of Citizens Communications Company filed with
the SEC on February 13, 2001, including financial statements of the GTE
combined entities as of September 30, 2000 and for the nine months ended
September 30, 2000 and 1999 and financial statements of Contel of
Minnesota, Inc. for the eight months ended August 31, 2000 and 1999, and
pro forma financial information; and
- Current Report on Form 8-K of Citizens Communications Company filed with
the SEC on November 14, 2000, including the audited financial statements
of the GTE combined entities and Contel of Minnesota, Inc. as of
December 31, 1999 and 1998 and for each of the years in the three-year
period ended December 31, 1999 and for the six months ended June 30, 2000
and 1999 and pro forma financial information.
We also incorporate by reference all documents subsequently filed by us
under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
after the date of this prospectus until our offering is completed.
We will provide you, upon written or oral request, with a copy of any of
these documents, at no cost. You should direct your request, either in writing
or by telephone, to
Citizens Communications Company
3 High Ridge Park, Stamford, Connecticut 06905
Attn.: Office of the Secretary
Telephone 203-614-5600
48
[LOGO]
$1,750,000,000
EXCHANGE OFFER
$300,000,000 6.375% SENIOR NOTES DUE 2004
$750,000,000 7.625% SENIOR NOTES DUE 2008
$700,000,000 9.00% SENIOR NOTES DUE 2031
PROSPECTUS
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Citizens Communications Company is incorporated under the Delaware General
Corporation Law and is empowered by Section 145 of such law to indemnify
officers and directors against certain expenses, liabilities and payments,
including liabilities arising under the Securities Act of 1933, as therein
provided. In addition, By-Laws 24 and 24A of Citizens Communication Company and
a resolution adopted by our Board of Directors in connection with the issuance
of the Securities provide for indemnification of specified persons, including
our officers and directors for liabilities, including those arising under said
Act, as provided in said By-Laws and resolution. Generally, By-Laws 24 and 24A
of our By-Laws provide that, to the fullest extent permitted by applicable law,
we shall indemnify and hold harmless, among others, any of our officers or
directors or any other entity for which he is acting at our request, from and
against any loss, damage or claim incurred by such person by reason of any act
or omission performed or omitted by such person in good faith on our behalf.
Such By-Laws, generally speaking, also provides that, to the fullest extent
permitted by applicable law, expenses (including legal fees) incurred by a
person in defending against any such liability shall, be advanced by us subject
to specified conditions. Our Certificate of Incorporation further provides that
no director shall be liable to us or our stockholders for monetary damages for
breach of fiduciary duty as a director, with stated exceptions.
We also maintain insurance providing coverage for us and our subsidiaries
against obligations incurred as a result of indemnification of our officers and
directors. The coverage also insures the officers and directors for a liability
against which they may not be indemnified by us or our subsidiaries but excludes
specified dishonest acts.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
3.1 Registrant's Restated Certificate of Incorporation, as
restated May 19, 2000 (incorporated by reference to
Exhibit 3-200.1 of the Registrant's Quarterly Report on
Form 10-Q (File No. 001-11001), for the six months ended
June 30, 2000).
3.2 Registrant's By-laws, as amended to date (incorporated by
reference to Exhibit 3-200.2 of the Registrant's Quarterly
Report on Form 10-Q (File No. 001-11001), for the nine
months ended September 30, 2000).
4.1* Indenture between the Registrant and The Chase Manhattan
Bank, as trustee, dated as of August 16, 2001 (incorporated
by reference to Exhibit 4.1 of the Registrant's Form 8-K
filed with the Securities and Exchange Commission on
August 22, 2001).
4.2* Exchange and Registration Rights Agreement among the
Registrant and Morgan Stanley Co. Incorporated, and J.P.
Morgan Securities Inc. as representatives for themselves and
the other initial purchasers, dated as of August 16, 2001
(incorporated by reference to Exhibit 4.2 of the
Registrant's Form 8-K filed with the Securities and Exchange
Commission on August 22, 2001).
4.3* Form of senior note (included in Exhibit 4.1).
5* Opinion of Winston & Strawn.
12 Statement re: Computation of Ratios.
23.1 Consent of KPMG LLP, independent public accountants.
23.2 Consent of KPMG LLP, independent public accountants.
II-1
23.3 Consent of Arthur Andersen LLP, independent public
accountants.
23.4 Consent of Arthur Andersen LLP, independent public
accountants.
23.5 Consent of Pricewaterhouse Coopers LLP, independent
accountants.
23.6* Consent of Winston & Strawn.
24* Powers of Attorney.
25* Statement of eligibility of trustee under the indenture on
Form T-1.
99.1* Form of Letter of Transmittal.
99.2* Form of Notice of Guaranteed Delivery.
------------------------
* Previously filed
(b) Financial Statement Schedules
Schedules are omitted because of the absence of conditions under which they
are required under the pertinent portion of the instructions for Form S-4.
(c) Opinion Materially Relating to the Transaction
None.
ITEM 22. UNDERTAKINGS.
(1) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(2) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(3) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(4) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-2
(5) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1993;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement.
(iii)To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form S-4, and has duly caused this Amendment No. 2 to Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Stamford and State of Connecticut on the 14th day of
January, 2002.
CITIZENS COMMUNICATIONS COMPANY
By: /s/ SCOTT N. SCHNEIDER
-----------------------------------------
Name: Scott N. Schneider
Title: VICE CHAIRMAN OF THE BOARD AND
EXECUTIVE VICE PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to Registration Statement has been signed below by the following persons
in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ LEONARD TOW* Chairman of the Board, Chief
--------------------------------- Executive Officer (principal January 14, 2002
Leonard Tow executive officer), and Director
/s/ RUDY J. GRAF* Vice Chairman of the Board, Chief
--------------------------------- Operating Officer, President and January 14, 2002
Rudy J. Graf Director
/s/ SCOTT N. SCHNEIDER Vice Chairman of the Board,
--------------------------------- Executive Vice President and January 14, 2002
Scott N. Schneider Director
/s/ DONALD B. ARMOUR* Vice President, Finance and
--------------------------------- Treasurer (principal financial January 14, 2002
Donald B. Armour officer)
/s/ ROBERT J. LARSON* Vice President and Chief Accounting
--------------------------------- Officer (principal accounting January 14, 2002
Robert J. Larson officer)
/s/ NORMAN I. BOTWINIK*
--------------------------------- Director January 14, 2002
Norman I. Botwinik
/s/ AARON I. FLEISCHMAN*
--------------------------------- Director January 14, 2002
Aaron I. Fleischman
II-4
SIGNATURE TITLE DATE
--------- ----- ----
/s/ STANLEY HARFENIST*
--------------------------------- Director January 14, 2002
Stanley Harfenist
/s/ ANDREW N. HEINE*
--------------------------------- Director January 14, 2002
Andrew N. Heine
/s/ JOHN L. SCHROEDER*
--------------------------------- Director January 14, 2002
John L. Schroeder
/s/ ROBERT D. SIFF*
--------------------------------- Director January 14, 2002
Robert D. Siff
/s/ ROBERT A. STANGER*
--------------------------------- Director January 14, 2002
Robert A. Stanger
/s/ EDWIN TORNBERG*
--------------------------------- Director January 14, 2002
Edwin Tornberg
/s/ CLAIRE L. TOW*
--------------------------------- Director January 14, 2002
Claire L. Tow
*By: /s/ SCOTT N. SCHNEIDER
----------------------------
Scott N. Schneider, AS
ATTORNEY-IN-FACT
II-5