Frontier Communications 2004 Annual Report Download - page 77

CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
F-33
As a result of our loss from continuing operations for the year ended December 31, 2002 dilutive securities of
3,373,846 issuable under employee compensation plans were excluded from the computation of diluted EPS because
their inclusion would have had an antidilutive effect.
In addition, for the years ended December 31, 2004, 2003 and 2002, restricted stock awards of 1,686,000, 1,249,000,
and 1,004,000 shares, respectively, are excluded from our basic weighted average shares outstanding and included in
our dilutive shares until the shares are no longer contingent upon the satisfaction of all specified conditions.
Equity Units and EPPICS
On August 17, 2004 we issued 32,073,633 shares of common stock, including 3,591,000 treasury shares, to our
equity unit holders in settlement of the equity purchase contract component of the equity units. With respect to the
$460,000,000 Senior Note component of the equity units, we repurchased $300,000,000 principal amount of these
Notes in July 2004. The remaining $160,000,000 of the Senior Notes were repriced and a portion was remarketed on
August 12, 2004 as the 6.75% Notes due August 17, 2006. During 2004, we repurchased an additional $108,230,000
of the 6.75% Notes which, in addition to the $300,000,000 purchased in July, resulted in a pre-tax charge of
approximately $20,080,000 during the third quarter of 2004, but will result in an annual reduction in interest expense
of about $27,555,000 per year.
As a result of our July dividend announcement with respect to our common shares, our 5% Company Obligated
Mandatorily Redeemable Convertible Preferred Securities due 2036 (EPPICS) began to convert to Citizens common
shares. As of December 31, 2004, approximately 74% of the EPPICS outstanding, or about $147,991,000 aggregate
principal amount of units, have converted to 11,622,749 Citizens common shares, including 725,000 issued from
treasury.
At December 31, 2004, we had 1,065,171 shares of potentially dilutive EPPICS, which were convertible into
common stock at a 4.36 to 1 ratio at an exercise price of $11.46 per share. As a result of the September 2004 special,
non-recurring dividend, the EPPICS exercise price for conversion into common stock was reduced from $13.30 to
$11.46. These securities have not been included in the diluted income per share calculation because their inclusion
would have had an antidilutive effect.
At December 31, 2003 and 2002, we had 4,025,000 shares of potentially dilutive EPPICS that have been included in
the diluted income (loss) per common share calculation for the period ended December 31, 2003.
Stock Units
At December 31, 2004, 2003 and 2002, we had 432,872, 427,475 and 416,305 stock units, respectively, issuable
under our Directors’ Deferred Fee Equity Plan and Non-Employee Directors’ Retirement Plan. These securities have
not been included in the diluted income per share calculation because their inclusion would have had an antidilutive
effect.