- Continued positive broadband momentum
with 29,200 net broadband additions
- Delivered sequential growth in Customer
Revenue
- Raised $2.75 billion in equity
offerings to fund acquisition of Verizon CA, FL and TX assets
- Maintained an attractive and
sustainable dividend payout ratio of 53%
- Updated 2015 guidance for free cash
flow, capital expenditures and cash taxes
Frontier Communications Corporation (NASDAQ: FTR) today reported
second quarter 2015 revenue of $1,368 million, operating income of
$193 million and net loss of $28 million, or $0.03 per share.
Excluding acquisition related interest expense of $73 million,
acquisition and integration costs of $35 million and certain tax
benefit items of $15 million (combined impact of $55 million, or
$0.06 per share after tax), non-GAAP adjusted net income was $27
million, or $0.03 per share, for the second quarter of 2015, as
determined by the Company in the attached Schedule B.
“Today we report on a quarter of substantial achievements,” said
Dan McCarthy, Frontier President and Chief Executive Officer. “On
the operational front, we achieved a sequential increase in
customer revenue, reflecting improved trends in the legacy Frontier
business, and a stable performance in Connecticut. These strong
revenue results reflect solid execution in both the residential and
business segments, and are a result of substantial initiatives to
enhance our product offerings and improve the customer experience.
We continued our track record of strong broadband net additions,
with 29,200 this quarter, representing our tenth consecutive
quarter of broadband share gains. We are building tremendous
momentum in the business and the plans and programs we are
implementing for the future.”
“We continue to make progress on our approval, integration and
financing of the Verizon Transaction. During the quarter we
successfully completed a $2.75 billion equity raise as the
underpinning for the remaining financing. We are also on track to
obtain all required regulatory approvals as well as complete the
integration of the Verizon properties. Finally, on a separate note,
we have accepted the full $283 million of the FCC’s Connect America
Fund – Phase II support allocated to Frontier’s markets. We will
begin using these funds in 2015 to expand our broadband
availability and capabilities. Together with our current business
operations, I believe the CAF II program provides Frontier the
opportunity to continue to build long term shareholder value.”
Revenue for the second quarter of 2015 was $1,368
million, a decrease of $3 million, or 0.2%, from $1,371 million
reported in the first quarter of 2015. In the second quarter, the
$264 million in revenues attributable to our Connecticut operations
were flat to those reported for the first quarter.
Customer revenue for the second quarter of 2015 of $1,236
million increased 0.3% from $1,233 million in the first quarter of
2015. For our legacy Frontier operations, the increase in data
services revenue exceeded the decline in voice services revenue.
Total residential revenue was stable at $615 million for the
second quarter of 2015, compared to $617 million in the first
quarter of 2015. Total business revenue was $621 million for
the second quarter of 2015, compared to $616 million in the first
quarter of 2015, an increase of 0.8%.
At June 30, 2015, the Company had 3,177,000 residential
customers. The second quarter of 2015 resulted in a net loss of
0.6% of our residential customers, compared to a net loss of 0.4%
in the first quarter of 2015. The average monthly residential
revenue per customer was $64.43 in the second quarter of 2015, an
increase of $0.30, or 0.5%, compared to the first quarter of
2015.
At June 30, 2015, the Company had 299,000 business
customers. The second quarter of 2015 resulted in a net loss of
0.6% of our business customers, compared to a net loss of 1.2% in
the first quarter of 2015. The average monthly business revenue per
customer was $689.21, an increase of 1.6% over the first quarter of
2015.
At June 30, 2015, the Company had 2,407,400 broadband
customers. The Company has added 29,200 net broadband customers
during the second quarter of 2015 compared to 17,100 net additions
in the first quarter of 2015.
At June 30, 2015, the Company had 569,500 video
customers. The second quarter of 2015 resulted in a net loss of
5,000 video customers, including 2,500 satellite video customers
compared to the first quarter of 2015 losses of 7,700 video
customers, including 3,500 satellite video customers.
Network access expenses for the second quarter of 2015
were $161 million, compared to $155 million in the first quarter of
2015. Network related expenses for the second quarter of
2015 were $313 million, compared to $325 million in the first
quarter of 2015. Selling, general and administrative
expenses (SG&A expenses) for the second quarter of 2015
were $331 million, compared to $330 million in the first quarter of
2015.
Depreciation and amortization for the second quarter of
2015 was $335 million, compared to $341 million in the first
quarter of 2015.
Acquisition and integration costs for the second quarter
of 2015 were $35 million ($0.02 per share after tax) compared to
$57 million ($0.04 per share after tax) in the first quarter of
2015. For the second quarter of 2015 these costs include $5 million
related to the Connecticut Acquisition and $30 million related to
the Verizon Transaction.
Operating income for the second quarter of 2015 was $193
million and operating income margin was 14.1% compared to operating
income of $163 million and operating income margin of 11.9% in the
first quarter of 2015.
Interest expense for the second quarter of 2015 was $260
million compared to $245 million in the first quarter of 2015.
Interest expense increased by $15 million in the second quarter,
primarily due to a full quarter of commitment fees for the Verizon
Transaction bridge loan facilities.
Income tax expense (benefit) for the second quarter of
2015 was a tax benefit of $38 million compared to a tax benefit of
$30 million in the first quarter of 2015. The Company’s effective
tax rate for the second quarter of 2015 was 57.8%. The second
quarter of 2015 includes certain tax benefit items arising from
state tax law changes and a state filing method change with an
impact of $15 million in reduced income tax expense.
Net income (loss) was a net loss of $28 million, or $0.03
per share, in the second quarter of 2015, compared to a net loss of
$51 million, or $0.05 per share, in the first quarter of 2015. The
second quarter of 2015 includes acquisition related interest
expense of $73 million, acquisition and integration costs of $35
million and certain tax benefit items of $15 million (combined
impact of $55 million, or $0.06 per share after tax). Excluding the
impact of the aforementioned items, the non-GAAP adjusted net
income for the second quarter of 2015 was $27 million, or $0.03 per
share, as compared to $21 million, or $0.02 per share, in the first
quarter of 2015.
Capital expenditures for Frontier business operations
were $178 million for the second quarter of 2015 compared to $170
million in the first quarter of 2015. Acquisition related capital
expenditures were $28 million in the second quarter and $10 million
in the first quarter of 2015. Capital expenditures funded by the
Connect America Fund Phase I were $7 million and $9 million in the
second and first quarter of 2015, respectively.
Operating cash flow was $528 million for the second
quarter of 2015 resulting in an operating cash flow margin of
38.6%, compared to operating cash flow of $504 million and an
operating cash flow margin of 36.7% for the first quarter of 2015.
Operating cash flow for the second quarter of 2015, as adjusted and
determined by the Company in the attached Schedule A, was $561
million, or 41.0%, after excluding $35 million of acquisition and
integration costs and ($2) million of non-cash pension and other
postretirement benefit costs.
Free cash flow, as determined by the Company in the
attached Schedule A, was $200 million for the second quarter of
2015 compared to $197 million in the first quarter. The Company’s
dividend represented a 53% payout of free cash flow for the second
quarter of 2015 and 54% for the first quarter.
Equity Issuance
In June 2015, the Company completed registered public offerings
for 165 million shares of common stock at a public offering price
of $5.00 per share, with aggregate net proceeds of $799 million,
and 19.25 million shares of 11.125% mandatory convertible preferred
stock (Series A) at a public offering price of $100.00 per share,
with aggregate net proceeds of $1,866 million. The Company will use
the net proceeds from these issuances to fund a portion of the
Verizon Transaction.
Pension Contributions
Cash contributions to the pension plan were $23 million for the
second quarter of 2015 and $40 million during the first six months
of 2015. As previously disclosed, we anticipate making
contributions of cash, or a combination of cash and other assets,
to our pension plan of approximately $100 million in 2015.
2015 Guidance Updated
For the full year of 2015, the Company is updating its guidance
to take into consideration its acceptance of the Federal
Communications Commission’s CAF II subsidy program. The Company’s
expectation for free cash flow is $825 million to $865
million and for capital expenditures for Frontier business
operations is $700 million to $750 million. The Company expects
that absent any further legislative changes in 2015, our 2015
cash taxes will be $95 million to $110 million.
Non-GAAP Measures
The Company uses certain non-GAAP financial measures in
evaluating its performance. These include non-GAAP adjusted net
income, free cash flow, operating cash flow and adjusted operating
cash flow. A reconciliation of the differences between non-GAAP
adjusted net income, free cash flow, operating cash flow and
adjusted operating cash flow and the most comparable financial
measures calculated and presented in accordance with GAAP is
included in the tables that follow. The non-GAAP financial measures
are by definition not measures of financial performance under GAAP,
and are not alternatives to operating income or net income (loss)
as reflected in the statement of operations or to cash flow as
reflected in the statement of cash flows, and are not necessarily
indicative of cash available to fund all cash flow needs. The
non-GAAP financial measures used by the Company may not be
comparable to similarly titled measures of other companies.
The Company believes that the presentation of these non-GAAP
financial measures provides useful information to investors
regarding the Company’s financial condition and results of
operations because these measures, when used in conjunction with
related GAAP financial measures, (i) together provide a more
comprehensive view of the Company’s core operations and ability to
generate cash flow, (ii) provide investors with the financial
analytical framework upon which management bases financial,
operational, compensation and planning decisions and (iii) presents
measurements that investors and rating agencies have indicated to
management are useful to them in assessing the Company and its
results of operations. In addition, the Company believes that
non-GAAP adjusted net income, free cash flow, operating cash flow
and adjusted operating cash flow, as the Company defines them, can
assist in comparing performance from period to period, without
taking into account factors affecting operating income or net
income (loss) as reflected in the statement of operations, or cash
flow as reflected in the statement of cash flows, including changes
in working capital and the timing of purchases and payments. The
Company has shown adjustments to its financial presentations to
exclude certain tax items, acquisition and integration costs,
acquisition related interest expense, severance costs and non-cash
pension and other postretirement benefit costs, as disclosed in the
attached Schedules A and B, because investors have indicated to
management that such adjustments are useful to them in assessing
the Company and its results of operations.
Management uses these non-GAAP financial measures to (i) assist
in analyzing the Company’s underlying financial performance from
period to period, (ii) evaluate the financial performance of its
business units, (iii) analyze and evaluate strategic and
operational decisions, (iv) establish criteria for compensation
decisions, and (v) assist management in understanding the Company’s
ability to generate cash flow and, as a result, to plan for future
capital and operational decisions. Management uses these non-GAAP
financial measures in conjunction with related GAAP financial
measures.
These non-GAAP financial measures have certain shortcomings. In
particular, free cash flow does not represent the residual cash
flow available for discretionary expenditures, since items such as
debt repayments and dividends are not deducted in determining such
measure. Operating cash flow has similar shortcomings as interest,
income taxes, capital expenditures, debt repayments and dividends
are not deducted in determining this measure. Management
compensates for the shortcomings of these measures by utilizing
them in conjunction with their comparable GAAP financial measures.
The information in this press release should be read in conjunction
with the financial statements and footnotes contained in our
documents filed with the U.S. Securities and Exchange
Commission.
Conference Call and Webcast
The Company will host a conference call today at 8:30 A.M.
Eastern time. In connection with the conference call and as a
convenience to investors, the Company furnished today on a Current
Report on Form 8-K certain materials regarding second quarter 2015
results. The conference call will be webcast and may be accessed
at:
http://investor.frontier.com/events.cfm
A telephonic replay of the conference call will be available
beginning at 11:30 A.M. Eastern time, Monday, August 3, 2015
through Saturday, August 8, 2015 at 11:30 A.M. Eastern time via
dial-in at 888-203-1112 for U.S. and Canadian callers or, outside
the United States and Canada, at 719-457-0820. Use the passcode
5281007 to access the replay. A webcast replay of the call will be
available at www.frontier.com/ir.
About Frontier Communications
Frontier Communications Corporation (NASDAQ:FTR) offers
broadband, voice, video, wireless Internet data access, data
security solutions, bundled offerings and specialized bundles for
residential customers, small businesses and home offices, and
advanced communications for medium and large businesses in 28
states. Frontier’s approximately 18,200 employees are based
entirely in the United States. More information is available at
www.frontier.com and www.frontier.com/ir.
Forward-Looking Statements
This document contains "forward-looking statements," related to
future, not past, events. Forward-looking statements address our
expected future business and financial performance and financial
condition, and contain words such as "expect," "anticipate,"
"intend," "plan," "believe," "seek," "see," "will," "would," or
"target." Forward-looking statements by their nature address
matters that are, to different degrees, uncertain. For us,
particular uncertainties that could cause our actual results to be
materially different than those expressed in our forward-looking
statements include: risks related to the pending acquisition of
properties from Verizon, including our ability to complete the
acquisition of such operations, our ability to successfully
integrate operations, our ability to realize anticipated cost
savings, sufficiency of the assets to be acquired from Verizon, our
ability to migrate Verizon’s operations from Verizon owned and
operated systems and processes to our owned and operated systems
and processes successfully, failure to enter into or obtain, or
delays in entering into or obtaining, certain agreements and
consents necessary to operate the acquired business as planned,
failure to obtain, delays in obtaining or adverse conditions
contained in any required regulatory approvals for the acquisition,
and increased expenses incurred due to activities related to the
transaction; the ability of the banks that have provided the bridge
financing commitments to meet their obligations thereunder in the
event the Company is required to draw on the bridge financing; our
ability to raise, on terms reasonable and acceptable to us, all or
a portion of the financing to replace the current bridge financing
commitments with debt and equity financing to complete the Verizon
Transaction prior to the closing of such transaction, which, if the
Verizon Transaction is ultimately not consummated or is delayed,
could require us to pay significant interest expense, dividends and
other costs in connection with the financing without achieving the
expected benefits of the Verizon Transaction; our ability to meet
our debt and debt service obligations; competition from cable,
wireless and other wireline carriers and the risk that we will not
respond on a timely or profitable basis; our ability to
successfully adjust to changes in the communications industry,
including the effects of technological changes and competition on
our capital expenditures, products and service offerings;
reductions in revenue from our voice customers that we cannot
offset with increases in revenue from broadband and video
subscribers and sales of other products and services; our ability
to maintain relationships with customers, employees or suppliers;
the impact of regulation and regulatory, investigative and legal
proceedings and legal compliance risks; continued reductions in
switched access revenues as a result of regulation, competition or
technology substitutions; the effects of changes in the
availability of federal and state universal service funding or
other subsidies to us and our competitors; our ability to
effectively manage service quality in our territories and meet
mandated service quality metrics; our ability to successfully
introduce new product offerings; the effects of changes in
accounting policies or practices, including potential future
impairment charges with respect to our intangible assets; our
ability to effectively manage our operations, operating expenses,
capital expenditures, debt service requirements and cash paid for
income taxes and liquidity, which may affect payment of dividends
on our common and preferred shares; the effects of changes in both
general and local economic conditions on the markets that we serve;
the effects of increased medical expenses and pension and
postemployment expenses; the effects of changes in income tax
rates, tax laws, regulations or rulings, or federal or state tax
assessments; our ability to successfully renegotiate union
contracts; changes in pension plan assumptions, interest rates,
regulatory rules and/or the value of our pension plan assets, which
could require us to make increased contributions to the pension
plan in 2015 and beyond; adverse changes in the credit markets or
in the ratings given to our debt securities by nationally
accredited ratings organizations, which could limit or restrict the
ability, or increase the cost, of financing to us; the effects of
state regulatory cash management practices that could limit our
ability to transfer cash among our subsidiaries or dividend funds
up to the parent company; the effects of severe weather events or
other natural or man-made disasters, which may increase our
operating expenses or adversely impact customer revenue; the impact
of potential information technology or data security breaches or
other disruptions; and the other factors that are described in our
filings with the U.S. Securities and Exchange Commission, including
our reports on Forms 10-K and 10-Q. These risks and uncertainties
may cause our actual future results to be materially different than
those expressed in our forward-looking statements. We do not
undertake to update or revise these forward-looking statements.
Frontier Communications
Corporation
Consolidated Financial Data
For the quarter ended For the six months ended
($ in millions and
shares in thousands, except per share amounts)
June 30, March 31, June 30, June 30, 2015 2015 2014 2015 2014
Statement of Operations Data Revenue $ 1,368 $ 1,371
$ 1,147 $ 2,739 $ 2,301 Operating expenses: Network access
expenses 161 155 106 316 213 Network related expenses (1) 313 325
259 638 522 Selling, general and administrative expenses (1) 331
330 265 661 531 Depreciation and amortization 335 341 274 676 555
Acquisition and integration costs (2) 35 57 19
92 30 Total operating expenses 1,175
1,208 923 2,383 1,851 Operating income
193 163 224 356 450 Investment and other income, net 1 1 - 2
1 Interest expense 260 245 167 505
338 Income (loss) before income taxes (66) (81) 57
(147) 113 Income tax expense (benefit) (38) (30)
19 (68) 36
Net income (loss)
(2) $ (28) $ (51) $ 38 $ (79) $ 77 Weighted average
shares outstanding - basic (6) 1,037,407 994,716 994,628 1,018,976
994,285
Basic net income (loss) per common share
(3) $ (0.03) $ (0.05) $ 0.04 $ (0.08) $ 0.08
Non-GAAP adjusted basic net income per common share
(3)(4) $ 0.03 $ 0.02 $ 0.05 $ 0.05 $ 0.10
Other
Financial Data Capital expenditures - Business operations $ 178
$ 170 $ 126 $ 348 $ 261 Capital expenditures - Integration
activities 28 10 32 38 42 Operating cash flow, as adjusted (4) 561
564 515 1,125 1,036 Free cash flow (4) 200 197 216 397 451
Dividends paid 106 105 100 211 200 Dividend payout ratio (5) 53%
54% 46% 53% 44%
(1)
Includes severance costs of $1 million for each of
the quarters ended March 31, 2015 and June 30, 2014, and $1 million
for each of the six months ended June 30, 2015 and 2014.
(2)
Reflects acquisition and integration costs of $35 million ($23
million or $0.02 per share after tax), $57 million ($35 million or
$0.04 per share after tax), and $19 million ($13 million or $0.01
per share after tax) for the quarters ended June 30, 2015, March
31, 2015 and June 30, 2014, respectively and $92 million ($58
million or $0.06 per share after tax) and $30 million ($19 million
or $0.02 per share after tax) for the six months ended June 30,
2015, and 2014, respectively.
(3)
Calculation based on weighted average shares outstanding-basic.
(4)
Reconciliations to the most comparable GAAP measures are presented
in Schedules A and B at the end of these tables.
(5)
Represents dividends paid divided by free cash flow, as determined
in Schedule A.
(6)
As of June 30, 2015, there were 1,168,266 shares of common stock
outstanding and 19,250 shares of mandatory convertible preferred
stock (Series A) outstanding.
Frontier Communications
Corporation
Consolidated Financial Data
For the quarter ended June 30, 2015 March 31, 2015
($ in
millions)
Connecticut Frontier Connecticut Frontier June 30, Consolidated
Operations Legacy Consolidated Operations Legacy 2014
Selected Statement of Operations Data Revenue: Voice
services $ 515 $ 92 $ 423 $ 525 $ 93 $ 432 $ 472
Data and Internet services
584 106 478 575 107 468 463 Other 137 54 83
133 54 79 78 Customer revenue 1,236 252
984 1,233 254 979 1,013 Switched access and subsidy 132
12 120 138 10 128 134
Total revenue $ 1,368 $ 264 $ 1,104 $ 1,371 $ 264 $ 1,107 $ 1,147
Other Financial Data Revenue: Residential $
615 $ 133 $ 482 $ 617 $ 138 $ 479 $ 497 Business 621
119 502 616 116 500 516 Customer
revenue 1,236 252 984 1,233 254 979 1,013 Switched access and
subsidy 132 12 120 138 10
128 134 Total revenue $ 1,368 $ 264 $ 1,104 $ 1,371 $ 264 $
1,107 $ 1,147 For the six months ended June 30, 2015
Connecticut Frontier June 30, Consolidated Operations Legacy 2014
Selected Statement of Operations Data Revenue:
Voice services $ 1,040 $ 185 $ 855 $ 954
Data and Internet services
1,159 213 946 924 Other 270 108 162 156
Customer revenue 2,469 506 1,963 2,034 Switched access and subsidy
270 22 248 267 Total revenue $ 2,739 $
528 $ 2,211 $ 2,301
Other Financial Data
Revenue: Residential $ 1,232 $ 271 $ 961 $ 993 Business
1,237 235 1,002 1,041 Customer revenue
2,469 506 1,963 2,034 Switched access and subsidy 270
22 248 267 Total revenue $ 2,739 $ 528 $ 2,211 $
2,301
Frontier Communications
Corporation
Consolidated Financial and Operating
Data
For the
quarter ended For the six months ended June 30, March 31, June 30,
June 30, 2015 2015 2014 2015 2014
Customers (in
thousands) (1) 3,476 3,496 3,026 3,476 3,026
Residential customer metrics: Customers (in thousands) (1)
3,177 3,195 2,762 3,177 2,762 Average monthly residential revenue
per customer $ 64.43 $ 64.13 $ 59.64 $ 64.31 $ 59.35 Customer
monthly churn 1.78% 1.78% 1.80% 1.78% 1.71%
Business
customer metrics: Customers (in thousands) (1) 299 301 264 299
264 Average monthly business revenue per customer $ 689.21 $ 678.15
$ 648.71 $ 684.58 $ 649.97
Employees 18,183 17,815
13,910 18,183 13,910
Broadband subscribers (in thousands)
(2) 2,407 2,378 1,932 2,407 1,932
Video subscribers (in
thousands) (2) 570 574 394 570 394
Switched access
minutes of use (in millions) 3,863 3,948 3,760 7,811 7,703
(1)
Reflects 470,100 residential customers, 48,800
business customers and 519,000 total customers attributable to the
Connecticut Acquisition as of October 24, 2014.
(2)
Reflects 385,800 broadband subscribers and 192,000 video
subscribers attributable to the Connecticut Acquisition as of
October 24, 2014.
Frontier Communications
Corporation
Condensed Consolidated Balance Sheet
Data
($ in
millions)
June 30, 2015 December 31, 2014
ASSETS
Current assets: Cash and cash equivalents $ 1,246 $ 682 Accounts
receivable, net 541 614 Restricted cash 1,840 - Other current
assets 461 190 Total current assets 4,088 1,486
Property, plant and equipment, net 8,432 8,566 Other assets
- principally goodwill 8,766 8,922 Total assets $
21,286 $ 18,974
LIABILITIES AND
EQUITY
Current liabilities: Long-term debt due within one year $ 97 $ 298
Accounts payable and other current liabilities 1,311
1,214 Total current liabilities 1,408 1,512 Deferred income
taxes and other liabilities 4,390 4,318 Long-term debt 9,440 9,486
Equity 6,048 3,658 Total liabilities and equity $
21,286 $ 18,974
Frontier Communications
Corporation
Consolidated Cash Flow Data
($ in
millions)
For the six months ended June 30, 2015 2014
Cash flows
provided from (used by) operating activities: Net income (loss)
$ (79) $ 77 Adjustments to reconcile net income (loss) to net cash
provided by operating activities: Depreciation and amortization 676
555 Stock based compensation expense 12 12 Other non-cash
adjustments 128 20 Deferred income taxes 115 (66) Change in
accounts receivable 77 15 Change in accounts payable and other
liabilities (99) (35) Change in other current assets (214)
63
Net cash provided from operating activities 616
641
Cash flows provided from (used by) investing
activities: Capital expenditures - Business operations (348)
(261) Capital expenditures - Integration activities (38) (42)
Network expansion funded by Connect America Fund (16) (25) Grant
funds received for network expansion from Connect America Fund - 4
Cash transferred (to) from escrow (1,840) 8 Cash paid for an
acquisition (16) - Other 1 23
Net cash used by
investing activities (2,257) (293)
Cash flows
provided from (used by) financing activities: Long-term debt
borrowings 3 11 Long-term debt payments (250) (230) Proceeds from
issuance of common stock, net 799 - Proceeds from issuance of
preferred stock, net 1,866 - Dividends paid (211) (200) Other
(2) (8)
Net cash provided from (used by) financing
activities 2,205 (427) Increase / (Decrease) in cash and
cash equivalents 564 (79) Cash and cash equivalents at January 1,
682 880
Cash and cash equivalents at June
30, $ 1,246 $ 801
Supplemental cash flow
information: Cash paid during the period for: Interest $
358 $ 319 Income taxes, net $ 20 $ 14
Schedule A
Frontier Communications
Corporation
Reconciliation of Non-GAAP Financial
Measures
For the quarter
ended For the six months ended
($ in
millions)
June 30, March 31, June 30, June 30, 2015 2015 2014 2015 2014
Operating Income to
Adjusted Operating Cash Flow
to Free Cash
Flow
Revenue $ 1,368 $ 1,371
$ 1,147 $ 2,739 $ 2,301
Less: Total operating expenses 1,175 1,208 923
2,383 1,851
Operating income 193
163 224 356 450 Depreciation and
amortization 335 341 274 676 555
Operating cash flow 528 504 498 1,032 1,005 Add back:
Acquisition and integration costs 35 57 19 92 30 Pension/OPEB costs
(1) (2) 2 (3) - - Severance costs - 1 1
1 1
Adjusted operating cash flow 561
564 515 1,125 1,036 Add back:
Interest and dividend income - 1 - 1 1 Stock based compensation 5 7
6 12 12 Subtract: Cash paid for income taxes 3 17 19 20 14
Capital expenditures - Business operations (2) 178 170 126 348 261
Interest expense (3) 185 188 160 373
323
Free cash flow $ 200 $
197 $ 216 $ 397 $
451 Operating income margin (Operating income
divided by revenue) As Reported 14.1% 11.9% 19.6% 13.0%
19.6% As Adjusted (4) 16.6% 16.2% 21.1% 16.4% 20.9%
Operating cash flow margin (Operating cash flow divided
by revenue) As Reported 38.6% 36.7% 43.4% 37.6% 43.7% As
Adjusted 41.0% 41.1% 44.9% 41.0% 45.0%
(1)
Reflects pension and other postretirement benefit
(OPEB) expense, net of capitalized amounts, of $18 million, $19
million and $14 million for the quarters ended June 30, 2015, March
31, 2015 and June 30, 2014, respectively, less cash pension
contributions and certain OPEB costs/payments of $20 million, $17
million and $18 million for the quarters ended June 30, 2015, March
31, 2015 and June 30, 2014, respectively. Reflects pension and OPEB
expense, net of capitalized amounts, of $37 million and $29 million
for the six months ended June 30, 2015 and 2014, respectively, less
cash pension contributions and certain OPEB costs/payments of $37
million and $29 million for the six months ended June 30, 2015 and
2014, respectively.
(2)
Excludes capital expenditures for integration activities.
(3)
Excludes interest expense of $73 million, $58 million and $8
million for the quarters ended June 30, 2015, March 31, 2015 and
June 30, 2014, respectively, and $132 million and $15 million for
the six months ended June 30, 2015 and 2014, respectively, related
to commitment fees on bridge loan facilities in connection with the
pending Verizon Transaction and the Connecticut Acquisition.
(4)
Excludes acquisition and integration costs, pension/OPEB costs and
severance costs.
Schedule B
Frontier Communications
Corporation
Reconciliation of Non-GAAP Financial
Measures
($ in millions,
except per share amounts)
For the quarter ended June 30, 2015 March 31, 2015 June 30, 2014
Net income
(loss)
Net Income (Loss) Basic Earnings (Loss) Per Share Net Income (Loss)
Basic Earnings (Loss) Per Share Net Income Basic Earnings Per Share
GAAP, as reported $ (28) $ (0.03) $ (51) $ (0.05) $ 38 $
0.04 Acquisition and integration costs 23 0.02 35 0.04 13 0.01
Severance costs - - 1 - 1 - Acquisition related interest expense
(1) 47 0.05 36 0.04 5 - Certain tax items (2) (15)
(0.01) - - (3) -
Non-GAAP, as
adjusted (3) $ 27 $ 0.03 $ 21 $ 0.02 $ 54 $ 0.05
For the six months ended June 30, 2015 June 30, 2014
Net income
(loss)
Net Income (Loss) Basic Earnings (Loss) Per Share Net Income Basic
Earnings Per Share GAAP, as reported $ (79) $ (0.08) $ 77 $
0.08 Acquisition and integration costs 58 0.06 19 0.02 Severance
costs 1 - 1 - Acquisition related interest expense (1) 83 0.08 10
0.01 Certain tax items (2) (15) (0.01) (5)
-
Non-GAAP, as adjusted (3) $ 48 $ 0.05 $ 102
$ 0.10
(1)
Represents interest expense related to commitment
fees on bridge loan facilities in connection with the pending
Verizon Transaction and the Connecticut Acquisition.
(2)
Includes impact arising from state law changes, state filing method
change and the net impact of uncertain tax positions.
(3)
Non-GAAP, as adjusted may not sum due to
rounding.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150803005612/en/
Frontier Communications CorporationInvestors:Luke Szymczak,
203-614-5044Vice President, Investor
Relationsluke.szymczak@FTR.comorMedia:Brigid
Smith, 203-614-5042AVP, Corporate
Communicationsbrigid.smith@FTR.com
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