- Adjusted EBITDA1 of $923 million and
quarterly Net Loss of $75 million
- Third sequential quarter of improved
FiOS® gross adds in CTF markets
- Resolution of non-paying CTF accounts
completed, in line with previous disclosures
- Achieved target of $1.25 billion in
total annualized synergies by end of Q1 2017, and remain on track
to deliver an additional $350 million by end of Q2 2018
- Board revises capital allocation
strategy, including reducing the quarterly dividend to $0.04 per
share and accelerating the pace of debt and leverage reduction
Frontier Communications Corporation (NASDAQ:FTR) today reported
its first quarter 2017 results, and announced that the Board of
Directors has revised the Company’s capital allocation strategy,
which includes a reduction in the quarterly dividend to $0.04 per
share, to enhance financial flexibility and achieve a targeted
leverage ratio2 of 3.5x by year-end 2021, down from the current
ratio of 4.39x.
Dan McCarthy, President and CEO, stated, “During the quarter, we
continued to realize our targeted efficiencies and synergies, and I
am also pleased to have achieved our third consecutive quarter of
improved FiOS gross additions in the California, Texas and Florida
(CTF) markets. We are executing on a number of initiatives with the
goal of enhancing customer experience, reducing churn, stabilizing
revenues and generating cash flow.
“Our Board regularly reviews the Company’s long-term capital
allocation strategy, and it has determined to reduce the dividend
at this time to provide additional financial flexibility, while
still returning a meaningful cash dividend to shareholders. As we
continue to execute on our strategy to deliver on the full
potential of our strong assets and generate additional cash flow,
we will optimize our capital allocation to ensure we strike a
balance between investing in the business, paying down debt and
returning capital to shareholders,” said McCarthy.
Business Highlights
- Frontier achieved a third consecutive
quarter of growth in broadband gross additions in its CTF markets,
which was driven by the first full quarter of robust marketing
- Overall, consumer churn was elevated
during the quarter, and to address this Frontier is investing in a
number of initiatives that will improve customer care, retention
and acquisition, including:
- Implementation of Pega® platform
underway that will integrate back-office systems to allow Frontier
to transform customer experience management, marketing and
cost-to-serve
- Launched e-commerce platform in April
to create additional sales channel, improve customer experience and
reduce call center volume
- Expanding network capacity to relieve
network congestion
- Increased CAF II households by over
27,000, plus another 82,000 households in adjacent areas
- Completed redeployment of commercial
salesforce to align with network and market opportunity
Synergy Realization
Frontier achieved its previously announced target of annualized
cost synergies of $1.25 billion as of the end of the first quarter
and remains on track to achieve an incremental $350 million in
annual savings by mid-year 2018.
Capital Allocation
The Board has reduced the quarterly common stock dividend from
$0.105 to $0.04 per share, beginning with the dividend payable on
June 30, 2017 to shareholders of record on June 15, 2017. This
change allows for reallocation of approximately $300 million
annually, increasing to approximately $400 million annually in the
second half of 2018 following the conversion of the mandatory
convertible Series A Preferred Stock to common stock. Frontier
plans to use these proceeds primarily to repay debt, with the goal
of lowering the leverage ratio from 4.39x to 4.0x by the end of
2019, and 3.5x by the end of 2021.
Frontier also announced its intention to issue secured debt in
the second quarter of 2017, subject to market conditions, and to
use the proceeds to address maturities and reduce interest
expense.
Financial Highlights for the First Quarter 2017
- Revenue of $2,356 million
- Operating income of $271 million;
operating margin of 11.5%
- Net loss of $75 million; net loss
attributable to common shares of $129 million, or ($0.11) per
share
- Adjusted EBITDA3 of $923 million;
Adjusted EBITDA margin4 of 39.2%
- Net cash provided from operating
activities of $300 million
- Adjusted free cash flow5 of $175
million
Revenues
For the quarter
ended
March 31,
2017
December 31,
2016
Consolidated
CTF
Frontier
Consolidated
CTF
Frontier
($ in
millions)
Amount
Operations
Legacy
Amount
Operations
Legacy
Total
revenue
$2,356
$1,087
$1,269
$2,409
$1,128
$1,281
Revenues for the first quarter were $2,356 million, compared to
$2,409 million in the fourth quarter of 2016. Approximately $11
million of the sequential decline in revenue was a result of the
previously disclosed cleanups of CTF accounts that were determined
to be non-paying following an intensified effort to address overdue
accounts. The cleanup associated with those overdue accounts has
now been completed. As previously disclosed, first-quarter revenue
and customer trends in Legacy operations reflect a one-time impact
from the automation of processes to address non-paying customers,
which accelerated deactivations. This process is now complete, and
we estimate the impact resulted in a one-time reduction in
customers of 18,000 which impacted Legacy revenues by $5
million.
Customers
As of and for the quarter ended March 31, 2017
December 31, 2016
Residential customers (in thousands):
Customers 4,736 4,891 Average monthly residential revenue
per customer $80.62 $80.33 Customer monthly churn 2.37% 2.08%
Business customers (in thousands) 484 502
Broadband
subscribers (in thousands) 4,164 4,271
Video (excl. DISH)
subscribers (in thousands) 1,065 1,145
Residential customer churn was 2.37% for the first quarter
(1.95% for Frontier legacy and 3.01% for CTF operations). The
overall increase in residential ARPC is a result of improved
collections in our CTF Operations, partially offset by continuing
shifts in subscriber mix.
Operating Expenses
Frontier’s total operating expenses in the first quarter of 2017
were $2,085 million, a 3.2% decrease from $2,154 million in the
fourth quarter of 2016. Frontier reduced adjusted operating
expenses6 in the first quarter by $10 million, to $1,433 million
from the fourth quarter of 2016. Integration expenses for the first
quarter were $2 million, down from $49 million in the fourth
quarter of 2016.
Cash Flow
Net cash provided from operating activities was $300 million for
the first quarter of 2017. Adjusted free cash flow7 was $175
million for the first quarter. Frontier’s dividend payout ratio8
was 71% in the first quarter, up from 39% in the fourth quarter of
2016.
Guidance
For the full year 2017, Frontier reiterated its guidance of:
- Adjusted free cash flow - $800 million
to $1.0 billion
- Capital expenditures - $1.0 billion to
$1.25 billion
- Integration - operating expense less
than $50 million; capital expenditures less than $50 million
- Cash taxes - $0 to $50 million
Non-GAAP Measures
Frontier uses certain non-GAAP financial measures in evaluating
its performance, including EBITDA, EBITDA margin, adjusted EBITDA,
adjusted EBITDA margin, free cash flow, adjusted free cash flow,
adjusted operating expenses, adjusted net income, leverage ratio,
and dividend payout ratio, each of which is described below.
Management uses these non-GAAP financial measures internally to (i)
assist in analyzing Frontier's underlying financial performance
from period to period, (ii) analyze and evaluate strategic and
operational decisions, (iii) establish criteria for compensation
decisions, and (iv) assist in the understanding of Frontier's
ability to generate cash flow and, as a result, to plan for future
capital and operational decisions. We believe that the presentation
of these non-GAAP financial measures provides useful information to
investors regarding our financial condition and results of
operations because these measures, when used in conjunction with
related GAAP financial measures (i) provide a more comprehensive
view of our 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) present measurements that investors
and rating agencies have indicated to management are useful to them
in assessing Frontier and its results of operations.
A reconciliation of these measures to the most comparable
financial measures calculated and presented in accordance with GAAP
is included in the accompanying tables. These non-GAAP financial
measures are not measures of financial performance or liquidity
under GAAP, nor are they alternatives to GAAP measures and they may
not be comparable to similarly titled measures of other
companies.
EBITDA is defined as net income (loss) less income tax expense
(benefit), investment and other income, interest expense and
depreciation and amortization. EBITDA margin is calculated by
dividing EBITDA by total revenues.
Adjusted EBITDA is defined as EBITDA, as described above,
adjusted to exclude acquisition and integration costs, non-cash
pension/OPEB costs (including pension settlement costs), and
restructuring costs and other charges. Adjusted EBITDA margin is
calculated by dividing adjusted EBITDA by total revenues.
Management uses EBITDA, EBITDA margin, adjusted EBITDA and
adjusted EBITDA margin to assist it in comparing performance from
period to period and as measures of operational performance. We
believe that these non-GAAP measures provide useful information for
investors in evaluating our operational performance from period to
period because they exclude depreciation and amortization expenses
related to investments made in prior periods and are determined
without regard to capital structure or investment activities. By
excluding capital expenditures, debt repayments and dividends,
these non-GAAP financial measures have certain shortcomings.
Management compensates for these shortcomings by utilizing these
non-GAAP financial measures in conjunction with the comparable GAAP
financial measures.
Adjusted net income (loss) attributable to Frontier common
shareholders is defined as net income (loss) attributable to
Frontier common shareholders and excludes acquisition and
integration costs, pension settlement costs, restructuring costs
and other charges, certain income tax items and the income tax
effect of these items. Adjustments have also been made to exclude
the financing costs and related income tax effects associated with
the Verizon Acquisition, including interest expense and preferred
dividends prior to our ownership of the CTF Operations. Adjusting
for these items allows investors to better understand and analyze
our financial performance over the periods presented.
Free Cash Flow, as used by management in the operation of its
business, is defined as net cash provided from operating activities
less capital expenditures for business operations and preferred
dividends. In determining free cash flow, further adjustments are
made to add back acquisition and integration costs, and interest
expense on commitment fees, which provides a better comparison of
our core operations from period to period. Changes in working
capital accounts are excluded from this calculation due to
seasonality and specific timing of cash receipts and disbursements
between various reporting periods.
Adjusted Free Cash Flow is defined as free cash flow, as
described above and adding back interest expense on incremental
debt and dividends paid, prior to our ownership of the CTF
Operations, on debt incurred and on preferred stock issued to
finance the Verizon Acquisition.
Management uses Free Cash Flow and Adjusted Free Cash Flow to
assist it in comparing performance and liquidity from period to
period and to obtain a more comprehensive view of our core
operations and ability to generate cash flow. We believe that these
non-GAAP measures are useful to investors in evaluating cash
available to service debt and pay dividends. In addition, we
believe that Adjusted Free Cash Flow provides a useful comparison
from period to period because it excludes the impact of financing
raised in connection with the Verizon Acquisition during periods
prior to our ownership of the CTF Operations. These non-GAAP
financial measures have certain shortcomings; they do not represent
the residual cash flow available for discretionary expenditures,
since items such as debt repayments, changes in working capital and
common stock dividends are not deducted in determining such
measures. Management compensates for these shortcomings by
utilizing these non-GAAP financial measures in conjunction with the
comparable GAAP financial measures.
Leverage Ratio is the measure of leverage specified in
Frontier’s credit facilities: “as of the last day of any fiscal
quarter, the ratio of (a) Total Indebtedness as of such day to (b)
Consolidated EBITDA for the four consecutive fiscal quarters ending
on such day.” The definitions of Total Indebtedness (and
Consolidated EBITDA are as set forth in the First Amended and
Restated Credit Agreement, dated as of February 27, 2017, among
Frontier Communications Corporation, JPMorgan Chase, N.A., as
Administrative Agent, and the other lenders party thereto, filed as
Exhibit 10 to Frontier’s Form 8-K, filed with the SEC on February
28, 2017.
Dividend Payout Ratio is calculated by dividing the dividends
paid on common stock (as adjusted) by adjusted free cash flow.
Dividends paid on common stock has been adjusted to exclude
dividends paid on common stock issued in June 2015, from the date
of issuance until April 1, 2016, when the proceeds of the issuance
were used in the Verizon Acquisition that generated adjusted free
cash flow from that date. Management uses the dividend payout ratio
as a metric to indicate how much money Frontier is returning to our
shareholders. We have made adjustments to exclude the impact of
financing raised in connection with the Verizon Acquisition during
periods prior to our ownership of the CTF Operations, which we
believe provides a useful comparison from period to period.
Adjusted Operating Expenses is defined as operating expenses
adjusted to exclude depreciation and amortization, acquisition and
integration costs, pension settlement costs, restructuring costs
and other charges, and non-cash pension/OPEB costs. Investors have
indicated that this non-GAAP measure is useful in evaluating
Frontier’s performance.
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
We will host a conference call today at 4:30 P.M. Eastern time.
In connection with the conference call and as a convenience to
investors, Frontier furnished today, on a Current Report on Form
8-K, additional materials regarding first quarter 2017
results. The conference call will be webcast and may be
accessed in the Webcasts & Presentations section of
Frontier's Investor Relations website
at www.frontier.com/ir.
A telephonic replay of the conference call will be available
from 8:00 P.M. Eastern Time on May 2, 2017,
through 8:00 P.M. Eastern Time on May 7,
2017 at 888-203-1112 for callers dialing from
the U.S. or Canada, and at 719-457-0820 for those
dialing from outside the U.S. or Canada. Use the
passcode 6536396 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) is a leader in
providing communications services to urban, suburban, and rural
communities in 29 states. Frontier offers a variety of services to
residential customers over its fiber-optic and copper networks,
including video, high-speed internet, advanced voice, and Frontier
Secure® digital protection solutions. Frontier Business Edge™
offers communications solutions to small, medium, and enterprise
businesses. More information about Frontier is available at
www.frontier.com.
Forward-Looking Statements
This earnings release 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: competition from cable, wireless and wireline
carriers, satellite, and OTT companies, 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; our
ability to implement successfully our organizational structure
changes; risks related to the operation of properties acquired from
Verizon, including our ability to retain or obtain customers in
those markets, our ability to realize anticipated cost savings, and
our ability to meet commitments made in connection with the
acquisition; 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;
our ability to attract/retain key talent; 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 2017 and beyond; adverse changes in the credit
markets; adverse changes in the ratings given to our debt
securities by nationally accredited ratings organizations; the
availability and cost of financing in the credit markets; covenants
in our indentures and credit agreements that may limit our
operational and financial flexibility; 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 risks and other factors contained in our
filings with the U.S. Securities and Exchange Commission, including
our reports on Forms 10-K and 10-Q. Any of the foregoing events, or
other events, could cause our results to vary from management’s
forward-looking statements included in this earnings release. These
risks and uncertainties may cause our actual future results to be
materially different than those expressed in our forward-looking
statements. We have no obligation to update or revise these
forward-looking statements and do not undertake to do so.
Frontier Communications Corporation Consolidated
Financial Data For the quarter ended March 31,
December 31, March 31, ($ in millions and shares in
thousands, except per share amounts) 2017 2016 2016
Statement of Operations Data Revenue $ 2,356 $ 2,409
$ 1,355 Operating expenses: Network access
expenses 411 417 160 Network related expenses 494 488 326 Selling,
general and administrative expenses 544 558 357 Depreciation and
amortization 579 562 316 Acquisition and integration costs 2 49 138
Pension settlement costs 43 - - Restructuring costs and other
charges 12 80 - Total operating
expenses 2,085 2,154 1,297
Operating income 271 255 58 Investment and other
income, net 3 13 11 Interest expense 388 386
373 Loss before income taxes (114 ) (118 )
(304 ) Income tax benefit (39 ) (38 ) (118 )
Net loss (75 ) (80 ) (186 ) Less: Dividends on preferred
stock 54 53 54
Net loss attributable to Frontier
common shareholders
$ (129 ) $ (133 ) $ (240 ) Weighted average shares
outstanding - basic and diluted 1,163,739 1,164,085 1,164,041
Basic and diluted net loss per common share $ (0.11 )
$ (0.12 ) $ (0.21 )
Other Financial Data:
Capital expenditures - Business operations $ 315 $ 299 $ 207
Capital expenditures - Integration activities 1 43 52 Dividends
paid - Common Stock 124 123 123 Dividends paid - Preferred Stock 54
53 54
Frontier Communications Corporation
Consolidated Financial Data For the quarter
ended March 31, 2017 December 31, 2016 Consolidated
CTF Frontier Consolidated CTF Frontier
March 31,
($ in
millions)
Amount Operations Legacy Amount Operations Legacy
2016
Selected Statement of Operations Data Revenue:
Data and internet services $
993
$
422
$
571
$
1,013
$ 439 $
574
$
587
Voice services 751 327 424 774 339 435 467 Video services 347 281
66 365 300 65 67 Other 68 5 63
58 (2 ) 60 68
Customer revenue 2,159 1,035 1,124 2,210 1,076 1,134 1,189
Switched access and subsidy 197 52
145 199 52 147
166 Total revenue $ 2,356 $ 1,087
$ 1,269 $ 2,409 $ 1,128 $ 1,281
$ 1,355
Other Financial Data Revenue:
Residential $ 1,164 $ 614 $ 550 $ 1,196 $ 637 $ 559 $ 583 Business
995 421 574 1,014
439 575 606
Customer revenue 2,159 1,035 1,124 2,210 1,076 1,134 1,189 Switched
access and subsidy 197 52 145
199 52 147
166 Total revenue $ 2,356 $ 1,087 $ 1,269
$ 2,409 $ 1,128 $ 1,281 $ 1,355
Operating Expenses: Network access expenses $
411 $ 261 $ 150 $ 417 $ 268 $ 149 $ 160 Network related expenses
494 197 297 488 199 289 326
Selling, general and administrative
expenses
544 226 318 558 246 312 357 Acquisition and integration costs 2 - 2
49 - 49 138 Pension settlement costs 43 22 21 - - - - Restructuring
costs and other charges 12 1 11
80 26 54 -
Cost and expenses (exclusive of
depreciation and amortization)
1,506 707 799 1,592 739 853 981 Depreciation and amortization
579 280 299 562
261 301 316
Total Operating Expenses $ 2,085 $ 987 $ 1,098
$ 2,154 $ 1,000 $ 1,154 $ 1,297
Frontier Communications Corporation Consolidated
Financial and Operating Data As of and for the
quarter ended March 31, 2017 December 31, 2016 March
31, 2016
Customers (in thousands) 5,220
(1)
5,393
(1)
3,372
Residential customer metrics Customers (in
thousands) 4,736
(1)
4,891
(1)
3,088 Net customer additions/(losses) (155 ) (144 ) (36 )
Average monthly residential revenue per
customer
$ 80.62 $ 80.33 $ 62.64 Customer monthly churn 2.37 % 2.08 % 1.83 %
Business customer metrics Customers (in thousands)
484
(1)
502
(1)
284
Broadband subscriber metrics (in thousands)
Broadband subscribers 4,164
(2)
4,271
(2)
2,487 Net subscriber additions/(losses) (107 ) (91 ) 25
Video (excl. DISH) subscriber metrics (in thousands) Video
subscribers 1,065
(2)
1,145
(2)
238 Net subscriber additions/(losses) (80 ) (77 ) (4 )
Video - DISH subscriber metrics (in thousands) DISH
subscribers 266
(2)
274
(2)
305 Net subscriber additions/(losses) (8 ) (7 ) (7 )
Employees 26,878 28,332 20,416
Switched Access Minutes of
Use (in thousands) 4,828 5,034 3,540 (1) 2,283,000
residential customers, 250,000 business customers and 2,533,000
total customers were acquired at the time of the April 2016 CTF
Acquisition. (2) 2,052,000 broadband subscribers and 1,165,000
video subscribers were acquired at the time of the April 2016 CTF
Acquisition.
Frontier Communications Corporation
Condensed Consolidated Balance Sheet Data
($ in
millions)
March 31, 2017 December 31, 2016
ASSETS
Current assets: Cash and cash equivalents $
341
$
522
Accounts receivable, net 836 938 Other current assets 207
196 Total current assets 1,384 1,656
Property, plant and equipment, net 14,616 14,902 Other assets -
principally goodwill 12,449 12,455
Total assets $ 28,449 $ 29,013
LIABILITIES AND
EQUITY
Current liabilities: Long-term debt due within one year $ 363 $ 363
Accounts payable and other current liabilities 1,717
2,081 Total current liabilities 2,080 2,444
Deferred income taxes and other liabilities 4,517 4,490 Long-term
debt 17,526 17,560 Equity 4,326 4,519
Total liabilities and equity $ 28,449 $ 29,013
Frontier Communications Corporation Consolidated Cash
Flow Data For the quarter ended March 31,
($ in
millions)
2017 2016
Cash flows provided from (used by)
operating activities: Net loss $ (75 ) $ (186 )
Adjustments to reconcile net loss to net
cash provided from (used by) operating activities:
Depreciation and amortization 579 316 Pension settlement costs 43 -
Pension/OPEB costs 16 16 Stock based compensation expense 3 8
Amortization of deferred financing costs 9 21 Deferred income taxes
(41 ) (119 ) Change in accounts receivable 105 26 Change in
accounts payable and other liabilities (328 ) (134 ) Change in
other current assets (11 ) -
Net cash
provided from (used by) operating activities 300 (52 )
Cash flows provided from (used by) investing activities:
Capital expenditures - Business operations (315 ) (207 ) Capital
expenditures - Integration activities (1 ) (52 ) Proceeds on sale
of assets 70 - Other 3 -
Net cash
used by investing activities (243 ) (259 )
Cash flows
provided from (used by) financing activities: Long-term debt
payments (38 ) (24 ) Financing costs paid (6 ) (6 ) Dividends paid
on common stock (124 ) (123 ) Dividends paid on preferred stock (54
) (54 ) Capital lease obligation payments (10 ) - Taxes paid on
behalf of employees for shares withheld (5 ) (10 ) Other (1
) -
Net cash used by financing activities (238
) (217 ) Decrease in cash, cash equivalents, and restricted
cash (181 ) (528 ) Cash, cash equivalents, and restricted cash at
January 1, 522 9,380
Cash,
cash equivalents, and restricted cash at March 31, $ 341
$ 8,852
Supplemental cash flow information:
Cash paid (received) during the period for: Interest $ 577 $
524 Income tax refunds, net $ (3 ) $ (32 )
SCHEDULE A Frontier Communications Corporation
Reconciliation of Non-GAAP Financial Measures
For the quarter ended March 31, December 31, March 31,
($ in
millions)
2017 2016 2016
EBITDA
Net Loss $ (75 ) $ (80 ) $ (186 ) Add back (subtract): Income tax
benefit (39 ) (38 ) (118 ) Interest expense 388 386 373 Investment
and other income, net (3 ) (13 ) (11 )
Operating income 271 255 58 Depreciation and amortization
579 562 316
EBITDA
850 817 374 Add back: Acquisition and
integration costs 2 49 138 Pension/OPEB costs (non-cash) (1) 16 20
16 Restructuring costs and other charges 12 80 - Pension settlement
costs 43 - -
Adjusted
EBITDA $ 923 $ 966
$ 528 EBITDA margin 36.1 % 33.9 % 27.6
% Adjusted EBITDA margin 39.2 % 40.0 % 38.9 %
Free Cash
Flow
Net cash provided from (used by) operating
activities
$ 300 $ 714 $ (52 ) Add back (subtract): Capital expenditures -
Business operations (315 ) (299 ) (207 ) Acquisition and
integration costs 2 49 138 Deferred income taxes 41 43 119 Income
tax benefit (39 ) (38 ) (118 ) Dividends on preferred stock (54 )
(53 ) (54 ) Non-cash (gains)/losses, net(2) (9 ) (35 ) (21 )
Changes in current assets and liabilities 234 (230 ) 108 Cash
refunded for income taxes 3 85 32 Restructuring costs and other
charges 12 80 - Interest expense - commitment fees(3) - - 10
Free cash flow $
175 $ 316 $ (45
) Dividends on preferred stock - - 54 Incremental interest
on new debt - - 178
Adjusted free cash flow $ 175 $
316 $ 187 (1) Reflects pension
and other postretirement benefit (OPEB) expense, net of capitalized
amounts, of $25 million, $27 million and $21 million for the
quarters ended March 31, 2017, December 31, 2016 and March 31,
2016, respectively, less cash pension contributions and certain
OPEB costs/payments of $9 million, $7 million and $5 million for
the quarters ended March 31, 2017, December 31, 2016 and March 31,
2016, respectively. (2) Includes amortization of deferred financing
costs and other non-cash adjustments from the consolidated cash
flow data. (3) Includes interest expense of $10 million for the
quarter ended March 31, 2016, related to commitment fees on bridge
loan facilities.
SCHEDULE B
Frontier Communications Corporation Reconciliation of
Non-GAAP Financial Measures For the quarter ended
March 31, 2017 December 31, 2016 March 31, 2016
Net Income
Basic Earnings
Net Income
Basic Earnings
Net Income
Basic Earnings
($ in millions,
except per share amounts)
(Loss)
(Loss) Per Share
(Loss)
(Loss) Per Share
(Loss)
(Loss) Per Share
Net loss attributable to Frontier common
shareholders
$ (129 ) $ (0.11 ) $ (133 ) $ (0.12 ) $ (240 ) $ (0.21 )
Acquisition and integration costs 2 49 138 Acquisition related
interest expense (1) - - 188 Restructuring costs and other charges
12 80 - Pension settlement costs 43 - - Certain other tax items (2)
1 (17 ) - Income tax effect on above items: Acquisition and
integration costs (1 ) (1 ) (53 ) Acquisition related interest
expense - 7 (73 ) Restructuring costs and other charges (4 ) (28 )
- Pension settlement costs (15 ) -
- 38 0.03 90 0.08
200 0.17 Dividends on preferred stock - -
- - 54 0.05
Adjusted net income (loss) attributable to
Frontier common shareholders(3)
$ (91 ) $ (0.08 ) $ (43 ) $ (0.04 ) $ 14 $ 0.01 (1)
Represents interest expense related to commitment fees on bridge
loan facilities in connection with the CTF Acquisition. Also
includes interest expense related to the September 2015 private
debt offering in connection with financing the CTF Acquisition. (2)
Includes impact arising from federal research and development
credits, the domestic production activities deduction, changes in
certain deferred tax balances, state tax law changes, state filing
method change, non-deductible transaction costs, and the net impact
of uncertain tax positions. (3) Adjusted net income (loss)
attributable to Frontier common shareholders may not sum due to
rounding.
SCHEDULE C
Frontier Communications Corporation Reconciliation of
Non-GAAP Financial Measures For the quarter ended
March 31, 2017 December 31, 2016 Consolidated
CTF Frontier Consolidated CTF Frontier March
31, 2016
($ in
millions)
Amount Operations Legacy Amount Operations Legacy
Adjusted Operating
Expenses
Total operating expenses $ 2,085
$ 987 $ 1,098 $
2,154
$
1,000
$
1,154
$
1,297
Subtract: Depreciation and amortization 579 280 299 562 261
301 316
Acquisition and integration costs
2 - 2 49 - 49 138 Pension/OPEB costs (non-cash) 16 3 13 20 5 15 16
Restructuring costs and other charges 12 1 11 80 26 54 - Pension
settlement costs 43 22 21
- - - -
Adjusted operating expenses $ 1,433
$ 681 $ 752 $
1,443 $ 708 $ 735
$ 827 For the quarter
ended March 31, December 31, March 31,
Dividend Payout
Ratio
2017 2016 2016 Numerator Dividends paid on common stock $
124 $ 123 $ 123
Less: Dividends on June 2015 common stock
issuance
- - (18 )
$ 124
$ 123 $ 105
Denominator Free cash flow (see Schedule A) $ 175 $ 316 $ (45 )
Dividends on preferred stock - - 54 Incremental interest expense
- - 178
Adjusted free
cash flow $ 175 $ 316
$ 187 Dividend payout ratio
71 % 39 % 56 %
As of or for the twelve
months ended
March 31,
Leverage
Ratio
2017
Numerator
Total Long-Term Debt $ 18,140
Future minimum payments for finance lease obligations 51 Future
minimum payments for capital lease obligations 124
Total Indebtedness 18,315 Less: Cash in excess of $50 million
(291 ) $
18,024 Denominator Operating
Income for the last twelve months $ 1,101 Adjustments(1)
3,007 $
4,108 Leverage Ratio
4.39 (1) Includes depreciation and amortization,
pension/OPEB costs (Non-cash), restructuring costs and other
charges, acquisition and integration costs, pension settlement
costs and cost synergies.
1 See “Non-GAAP Measures” for a description of this measure and
its calculation, and Schedule A for a reconciliation to net loss.2
Leverage ratio is a non-GAAP measure contained in a covenant in
Frontier’s credit facilities, derived from total long-term debt and
operating income. See “Non-GAAP Measures” for a description of this
measure and its calculation, and Schedule C for a reconciliation to
$18,140 million in total long-term debt at March 31, 2017 and
$1,101 million in operating income in the four quarters ended March
31, 2017.3 See Note 1, above.4 Adjusted EBITDA margin is a non-GAAP
measure of performance, calculated as Adjusted EBITDA, divided by
total revenue. See Schedule A for a reconciliation to net loss.5
Adjusted free cash flow is a non-GAAP measure of liquidity derived
from net cash provided from operating activities. See “Non-GAAP
Measures” for a description of this measure and its calculation,
and Schedule A for a reconciliation to net cash provided from
operating activities.6 Adjusted operating expenses is a non-GAAP
measure of performance derived from total operating expenses. See
“Non-GAAP Measures” for a description of this measure and its
calculation, and Schedule C for a reconciliation to total operating
expenses.7 See Note 5, above.8 Dividend payout ratio is a non-GAAP
measure of liquidity derived from dividends paid on common stock
(as adjusted) and adjusted free cash flow (see Note 5, above). See
“Non-GAAP Measures” for a description of this measure and its
calculation, and Schedule C for a reconciliation to the
$124 million of dividends paid on common stock in Q1 2017 and
Schedule A for the $300 million of net cash provided from
operating activities in Q1 2017.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170502006788/en/
Frontier Communications CorporationINVESTORS:Luke Szymczak, 203-614-5044VP, Investor
Relationsluke.szymczak@ftr.comorMEDIA:Brigid Smith, 203-614-5042AVP, Corporate
Communicationsbrigid.smith@ftr.com
Frontier Communications (NASDAQ:FTR)
Historical Stock Chart
From Mar 2024 to Apr 2024
Frontier Communications (NASDAQ:FTR)
Historical Stock Chart
From Apr 2023 to Apr 2024