Fourth Quarter
- Total revenue of $2.22 billion
- Consumer customer churn improved to
1.98% from 2.08% in Q3 2017, driven by both CTF FiOS® and
Legacy
- Continued sequential improvement in CTF
FiOS® broadband gross and net additions
- Net loss of $1.03 billion, driven by
goodwill impairment, partially offset by tax benefit
- Adjusted EBITDA1 of $919 million, in
line with guidance range
- Purchased $110 million principal amount
of senior unsecured notes
- Board of Directors suspends the
quarterly cash dividend on the Company’s common stock
Frontier Communications Corporation (NASDAQ:FTR) today reported
financial results for the fourth quarter and full year ended
December 31, 2017.
“Our fourth quarter results highlight the ongoing progress on
our key initiatives to improve customer retention, enhance the
customer experience, and align our cost structure,” said Dan
McCarthy, President and CEO. “We are pleased with continued
improvement in subscriber trends and churn in our California, Texas
and Florida (CTF) markets, and the continued operating efficiencies
achieved in the fourth quarter. As we implement our strategy, our
board regularly evaluates the optimal long-term capital allocation
for the business, and has voted to suspend the dividend on common
shares. The suspension will make available an additional $250
million annually2 to accelerate debt reduction. For 2018, we remain
committed to enhancing the customer experience, further improving
churn, maintaining strong cash flow, and strengthening the balance
sheet as we pursue further stabilization of the business and growth
longer-term.”
_______________
1 See “Non-GAAP Measures” for a description of this measure and its
calculation. See Schedule A for a reconciliation to net loss. 2
Following conversion of the Frontier Communication 11.125%
Mandatory Convertible Preferred Stock into common stock in June
2018, the common stock dividends would have been approximately $250
million annually at the dividend rate paid in Q4 2017.
Consolidated Results
Consolidated revenues for the fourth quarter 2017 were $2.22
billion. Within consolidated revenue, consumer revenue was $1.09
billion, commercial revenue was $941 million and regulatory revenue
was $190 million. Consolidated revenues for the full year 2017 were
$9.13 billion. Within consolidated revenue, consumer revenue was
$4.48 billion, commercial revenue was $3.88 billion and regulatory
revenue was $776 million.
Net loss for the fourth quarter of 2017 was $1.03 billion. Net
loss for the fourth quarter included an $830 million tax benefit
resulting from the reduction in federal tax rates, and a $1.82
billion (after tax) goodwill impairment. Net loss for the fourth
quarter attributable to common shares was $1.08 billion, for a
diluted net loss per common share of $13.91. Adjusted EBITDA3
totaled $919 million for an adjusted EBITDA margin4 of 41.5%. For
the full year 2017, net loss was $1.80 billion. Net loss for 2017
included an $830 million tax benefit resulting from the reduction
in federal tax rates and a $2.35 billion (after tax) goodwill
impairment. Net loss attributable to common shares was $2.02
billion, for a diluted net loss per common share of $25.99. Full
year 2017 adjusted EBITDA totaled $3.68 billion, for an adjusted
EBITDA margin of 40.4%.
The Company attained more than $190 million in annualized cost
synergies and remains on track to achieve its target of $350
million in annualized run-rate cost synergies by mid-2018.
For the fourth quarter of 2017, net cash provided from operating
activities was $665 million and adjusted free cash flow5 was $228
million. For the full year 2017, net cash provided from operating
activities was $1.85 billion and adjusted free cash flow5 was $790
million.
Consumer Business Highlights for the Fourth Quarter
- Revenue was $1.09 billion, a sequential
decline of $16 million versus the $22 million sequential decline in
the third quarter. The improved trend was driven by a stronger
performance in both Legacy and CTF revenue.
- Customer churn improved to 1.98% (1.83%
for Frontier Legacy and 2.22% for CTF operations) compared to 2.08%
for the third quarter of 2017 (1.92% for Frontier Legacy and 2.33%
for CTF operations), with CTF FiOS® and Legacy contributing to the
overall improvement.
- Combined Average Revenue Per Customer
(ARPC) of $81.61 ($65.11 for Frontier Legacy and $107.35 for CTF
operations). Each measure of ARPC improved sequentially, despite
the benefit to third quarter ARPC associated with the Mayweather
vs. McGregor fight.
_______________
3 See Note 1, above. 4 See Note 1, above. Adjusted EBITDA margin is
a non-GAAP measure of performance, calculated as adjusted EBITDA,
divided by total revenue. See “Non-GAAP Measures” for a description
of this measure and its calculation. 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.
Commercial Business Highlights for the Fourth Quarter
- Revenue of $941 million, a sequential
decline of $17 million versus the $24 million sequential decline in
the third quarter. The decline was predominantly driven by
carrier/wholesale revenue.
- Total commercial customers of 453,000
compared to 463,000 during the third quarter of 2017.
- SME (Small, Medium, & Enterprise)
revenue was roughly stable sequentially.
Capital Structure and Capital Allocation
- Frontier purchased $110 million
principal amount of its 2018 and 2019 senior unsecured notes on the
open market during the fourth quarter of 2017.
- As of December 31, 2017, Frontier’s
leverage ratio (as calculated in accordance with its credit
agreements) was 4.59:1, which complied with its obligations under
its credit agreements. The leverage ratio was 4.39:1 as of
September 30, 2017.
- Frontier remains committed to reducing
debt and improving its financial leverage profile.
- Subsequent to the quarter, on January
25, 2018, Frontier amended its credit facilities to provide
increased flexibility in managing its capital structure.
- The Board of Directors has suspended
the quarterly cash dividend on the Company’s common stock beginning
with the first quarter of 2018. This change allows for a
reallocation of approximately $250 million annually, following the
conversion of Frontier’s 11.125% Mandatory Convertible Series A
Preferred Stock (Convertible Preferred) to common stock in June
2018.
- The Board of Directors has declared a
regular quarterly dividend on the Convertible Preferred
of $2.78125 per share, payable in cash on March 30,
2018 to holders of record at the close of business
on March 15, 2018.
Guidance
Our full year 2018 guidance includes a new metric, operating
free cash flow. Operating free cash flow, a non-GAAP measure, is
defined as net cash provided from operating activities less capital
expenditures. Operating free cash flow is directly calculable from
our GAAP financial statements and is a more appropriate free cash
flow metric for the Company now that the integration of the CTF
properties, with its associated integration and acquisition costs,
is complete.
For the full year 2018, Frontier’s guidance is the
following:
- Adjusted EBITDA6 – Approximately $3.6
billion
- Capital expenditures – $1.0 billion to
$1.15 billion
- Cash taxes – Less than $25 million
- Cash pension/OPEB – Approximately $150
million
- Interest expense – Approximately $1.5
billion
- Operating free cash flow7 –
Approximately $800 million
_______________
6 See Note 1, above. 7 Operating 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 D for a reconciliation to
net cash provided from operating activities and to our prior cash
flow metric, adjusted free cash flow.
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,
operating free cash flow, adjusted operating expenses, 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. Management believes that the presentation of
these non-GAAP financial measures provides useful information to
investors regarding Frontier’s 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 Frontier’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) 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), interest expense, investment and other income,
gains/losses on extinguishment of debt, 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, GAAP
pension/OPEB expense (including pension settlement costs),
restructuring costs and other charges, stock-based compensation
expense, goodwill impairment charges, and certain other
non-recurring items (e.g. storm-related costs in the fourth quarter
of 2017). 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.
Management believes that these non-GAAP measures provide useful
information for investors in evaluating Frontier’s 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, among other factors, 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, restructuring costs and other charges, pension
settlement costs, goodwill impairment charges, certain income tax
items and the income tax effect of these items, and one-time
storm-related costs in Q3 2017 (and which, owing to the timing of
the storms, also will be excluded in Q4 of 2017). Adjustments have
also been made to exclude the financing costs and related income
tax effects associated with the April 1, 2016 Verizon Transaction,
including interest expense on debt raised to finance the
transaction and preferred dividends paid, in each case prior to
Frontier’s ownership of the CTF Operations. Adjusting for these
items allows investors to better understand and analyze Frontier’s
financial performance over the periods presented.
Management defines free cash flow 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 exclude acquisition and integration
expense, income taxes, restructuring costs, one-time storm-related
costs and associated capital expenditures, and interest expense on
commitment fees, which provides a better comparison of 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, adjusted by excluding interest expense, prior to
Frontier’s April 1, 2016 ownership of the CTF Operations, on debt
Frontier incurred to finance the Verizon Transaction, and preferred
stock dividends paid prior to April 1, 2016.
In 2018, the Company is introducing a more traditional and
simplified measurement for free cash flow: operating free cash
flow. Management defines operating free cash flow, a non-GAAP
measure, as net cash provided from operating activities less
capital expenditures.
Management uses free cash flow, adjusted free cash flow, and
operating free cash flow to assist it in comparing liquidity from
period to period and to obtain a more comprehensive view of
Frontier’s core operations and ability to generate cash flow.
Management believes that these non-GAAP measures are useful to
investors in evaluating cash available to service debt and pay
dividends. These non-GAAP financial measures have certain
shortcomings; they do not represent the residual cash flow
available for discretionary expenditures, as items such as debt
repayments 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.
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 Transaction that generated adjusted free
cash flow from that date. Management uses the dividend payout ratio
as a metric to indicate the proportion of Frontier’s adjusted free
cash flow that is used to pay dividends to its common shareholders.
Management has made adjustments to exclude the impact of financing
raised in connection with the Verizon Transaction during periods
prior to Frontier’s ownership of the CTF Operations, which
management believes 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, goodwill impairment charges, GAAP pension/OPEB
expense (including pension settlement costs), stock-based
compensation expense, one-time storm-related costs, and
restructuring costs and other charges. 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 Frontier’s documents filed with the U.S. Securities and Exchange
Commission.
Conference Call and Webcast
Frontier 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, under cover of a Current
Report on Form 8-K, additional materials regarding fourth 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 February 27, 2018,
through 8:00 P.M. Eastern Time on March 4, 2018, 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 7023822 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 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
express management’s expectations regarding Frontier’s future
business, financial performance, and financial condition, and
contain words such as "expect," "anticipate," "intend," "plan,"
"believe," "seek," "see," "may," "will," "would," or "target."
Forward-looking statements by their nature address matters that
are, to different degrees, uncertain. For Frontier, particular
uncertainties that could cause actual results to be materially
different than those expressed in such forward-looking statements
include: competition from cable, wireless and wireline carriers,
satellite, and OTT companies, and the risk that Frontier will not
respond on a timely or profitable basis; Frontier’s ability to
successfully adjust to changes in the communications industry,
including the effects of technological changes and competition on
its capital expenditures, products and service offerings;
Frontier’s ability to implement organizational structure changes;
risks related to the operation of Frontier’s properties, including
Frontier’s ability to retain or obtain customers in Frontier’s
legacy markets and those acquired from Verizon; Frontier’s ability
to realize anticipated cost savings, and ability to meet
commitments made in connection with the Verizon acquisition;
reductions in revenue from voice customers that Frontier cannot
offset with increases in revenue from broadband and video
subscribers and sales of other products and services; Frontier’s
ability to maintain relationships with customers, employees or
suppliers; Frontier’s ability to attract/retain key talent; the
effects of governmental legislation and regulation on Frontier’s
business; the impact of regulatory, investigative and legal
proceedings and legal compliance risks; government infrastructure
projects that impact capital expenditures; 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 Frontier and its competitors; Frontier’s ability
to meet its remaining CAF II broadband buildout obligations on a
timely basis; Frontier’s ability to effectively manage service
quality and meet mandated service quality metrics; Frontier’s
ability to successfully introduce new product offerings; the
effects of changes in accounting policies or practices, including
potential future impairment charges with respect to intangible
assets; Frontier’s ability to effectively manage its operations,
operating expenses, capital expenditures, debt service requirements
and cash paid for income taxes and liquidity; the effects of
changes in both general and local economic conditions in the
markets that Frontier serves; 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; Frontier’s ability to
successfully renegotiate union contracts; changes in pension plan
assumptions, interest rates, discount rates, regulatory rules
and/or the value of Frontier’s pension plan assets, which could
require Frontier to make increased contributions to the pension
plan; adverse changes in the credit markets; adverse changes in the
ratings given to Frontier’s debt securities by nationally
accredited ratings organizations; the availability and cost of
financing in the credit markets; covenants in Frontier’s indentures
and credit agreements that may limit Frontier’s operational and
financial flexibility as well as its ability to access the capital
markets in the future; the effects of state regulatory cash
management practices that could limit Frontier’s ability to
transfer cash among its 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 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
Frontier’s filings with the U.S. Securities and Exchange
Commission, including its reports on Forms 10-K and 10-Q. These
risks and uncertainties may cause actual future results to be
materially different than those expressed in such forward-looking
statements. Frontier has no obligation to update or revise these
forward-looking statements and does not undertake to do so.
Frontier Communications Corporation Consolidated
Financial Data For the
quarter ended For the year ended ($ in millions and shares in
thousands, except per share amounts) December 31, 2017 September
30, 2017 December 31, 2016 December 31, 2017 December 31, 2016
Statement of Operations Data Revenue $ 2,217 $
2,251 $ 2,409 $ 9,128 $ 8,896
Operating expenses: Network access expenses 388 390 417 1,597 1,470
Network related expenses 491 497 488 1,959 1,887 Selling, general
and administrative expenses 457 486 558 2,018 2,093 Depreciation
and amortization 514 539 562 2,184 2,031 Goodwill impairment 2,078
- - 2,748 - Acquisition and integration costs 10 1 49 25 436
Pension settlement costs 6 15 - 83 - Restructuring costs and other
charges 27 14 80
82 91 Total operating expenses 3,971
1,942 2,154 10,696
8,008 Operating income (loss) (1,754 ) 309 255
(1,568 ) 888 Investment and other income (loss), net (2 ) 3
13 3 27 Loss (gain) on extinguishment of debt and debt exchanges (1
) (1 ) - 88 7 Interest expense 377 382
386 1,534 1,531
Loss before income taxes (2,132 ) (69 ) (118 ) (3,187 ) (623 )
Income tax benefit (1,103 ) (31 ) (38 )
(1,383 ) (250 )
Net loss (1,029 ) (38 ) (80 )
(1,804 ) (373 ) Less: Dividends on preferred stock 53
54 53 214
214
Net loss attributable to Frontier common
shareholders $ (1,082 ) $ (92 ) $ (133 ) $ (2,018 ) $ (587 )
Weighted average shares outstanding - basic 77,805 77,797
77,606 77,736 77,607 Weighted average shares outstanding - diluted
77,805 77,797 77,606 77,736 77,607
Basic net loss per
common share $ (13.91 ) $ (1.19 ) $ (1.73 ) $ (25.99 ) $ (7.61
)
Diluted net loss per common share $ (13.91 ) $ (1.19 ) $
(1.73 ) $ (25.99 ) $ (7.61 )
Other Financial Data:
Capital expenditures - Business operations $ 308 $ 268 $ 299 $
1,154 $ 1,259 Capital expenditures - Integration activities 15 14
43 34 142 Dividends paid - Common stock 47 47 123 266 493 Dividends
paid - Preferred stock 53 54 53 214 214
Frontier
Communications Corporation Consolidated Financial Data
For the quarter ended For the
year ended December 31, 2017 September 30, 2017 December 31, 2016
December 31, 2017 December 31, 2016
($ in
millions)
Selected Statement of Operations Data Revenue:
Data and internet services (1) $ 939 $ 956 $ 1,013 $ 3,862 $ 3,693
Voice services 687 702 774 2,864 2,886 Video services 310 318 365
1,304 1,244 Other 91 84 58 322
276 Customer revenue (1) 2,027 2,060 2,210 8,352 8,099 Switched
access and subsidy 190 191 199 776
797 Total revenue (1) $ 2,217 $ 2,251 $ 2,409 $ 9,128 $
8,896
Other Financial Data Revenue: Consumer $
1,086 $ 1,102 $ 1,196 $ 4,476 $ 4,383 Commercial (1) 941
958 1,014 3,876 3,716 Customer revenue
(1) 2,027 2,060 2,210 8,352 8,099 Switched access and subsidy
190 191 199 776 797 Total
revenue (1) $ 2,217 $ 2,251 $ 2,409 $ 9,128 $ 8,896 (1)
Includes revenue from Frontier Secure Strategic Partnerships
business, which was sold in May of 2017, of $20 million for the
three months ended December 31, 2016 and $40 million and $84
million for the twelve months ended December 31, 2017 and 2016,
respectively.
Frontier Communications
Corporation Consolidated Financial and Operating Data
For the quarter ended For the year ended December 31,
2017 September 30, 2017 December 31, 2016 December 31, 2017
December 31, 2016
Customers (in thousands) 4,850
4,949 5,393 4,850 5,393
Consumer customer metrics
Customers (in thousands) 4,397 4,486 4,891 4,397 4,891 Net customer
additions/(losses) (89 ) (99 ) (144 )
(1)
(494 ) 1,767
(1)
Average monthly consumer revenue per customer $ 81.61 $ 80.91 $
80.33 $ 80.96 $ 77.47 Customer monthly churn 1.98 % 2.08 % 2.08 %
2.17 % 1.98 %
Commercial customer metrics Customers
(in thousands) 453 463 502
(1)
453 502
(1)
Broadband subscriber metrics (in thousands) Broadband
subscribers 3,938 4,000 4,271 3,938 4,271 Net subscriber
additions/(losses) (63 ) (63 ) (91 )
(2)
(333 ) 1,809
(2)
Video (excl. DISH) subscriber metrics (in thousands)
Video subscribers 961 981 1,145 961 1,145 Net subscriber
additions/(losses) (20 ) (26 ) (77 )
(2)
(184 ) 903
(2)
Video - DISH subscriber metrics (in thousands) DISH
subscribers 235 244 274 235 274 Net subscriber additions/(losses)
(9 ) (10 ) (7 )
(2)
(39 ) (38 )
(2)
Employees 22,736
(3)
23,181 28,332 22,736
(3)
28,332 (1) 2,283,000 consumer customers, 250,000 commercial
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.
(3) At December 31, 2016, we had
approximately 1,900 employees from our Frontier Secure Partnerships
business, which was sold in May 2017.
Frontier Communications Corporation
Condensed Consolidated Balance Sheet Data
($ in
millions)
December 31, 2017 December 31, 2016
ASSETS
Current assets: Cash and cash equivalents $ 362 $ 522 Accounts
receivable, net 819 938 Other current assets 142 196
Total current assets 1,323 1,656 Property, plant and
equipment, net 14,377 14,902 Other assets - principally goodwill
9,184 12,455 Total assets $ 24,884 $ 29,013
LIABILITIES AND
EQUITY
Current liabilities: Long-term debt due within one year $ 656 $ 363
Accounts payable and other current liabilities 1,852
2,081 Total current liabilities 2,508 2,444 Deferred income
taxes and other liabilities 3,132 4,490 Long-term debt 16,970
17,560 Equity 2,274 4,519 Total liabilities and
equity $ 24,884 $ 29,013
Frontier Communications
Corporation Consolidated Cash Flow Data
For the year ended December 31,
($ in
millions)
2017 2016
Cash flows provided from (used by)
operating activities: Net loss $ (1,804 ) $ (373 ) Adjustments
to reconcile net loss to net cash provided from (used by) operating
activities: Depreciation and amortization 2,184 2,031 Loss on
extinguishment of debt and debt exchanges 88 7 Special termination
benefits 5 26 Pension settlement costs 83 - Pension/OPEB costs 17
79 Stock-based compensation expense 14 24 Amortization of deferred
financing costs 33 46 Other adjustments (14 ) (12 ) Deferred income
taxes (1,385 ) (206 ) Goodwill impairment 2,748 - Change in
accounts receivable 122 (19 ) Change in accounts payable and other
liabilities (315 ) (12 ) Change in other current assets 74
85
Net cash provided from operating
activities 1,850 1,676
Cash flows provided from (used
by) investing activities: Capital expenditures - Business
operations (1,154 ) (1,259 ) Capital expenditures - Integration
activities (34 ) (142 ) Cash paid for the CTF Acquisition - (9,871
) Proceeds on sale of assets 110 8 Other 24 5
Net cash used by investing activities (1,054 )
(11,259 )
Cash flows provided from (used by) financing
activities: Proceeds from long-term debt borrowings 1,500 1,940
Long-term debt payments (1,811 ) (453 ) Financing costs paid (15 )
(39 ) Premium paid to retire debt (86 ) - Dividends paid on common
stock (266 ) (493 ) Dividends paid on preferred stock (214 ) (214 )
Capital lease obligation payments (42 ) (8 ) Other (8 )
(8 )
Net cash provided from (used by) financing
activities (942 ) 725 Decrease in cash, cash
equivalents, and restricted cash (146 ) (8,858 ) Cash, cash
equivalents, and restricted cash at January 1, 522
9,380
Cash, cash equivalents, and
restricted cash at December 31, $ 376 $ 522
Supplemental cash flow information: Cash paid
(received) during the period for: Interest $ 1,548 $ 1,467
Income tax refunds, net $ (51 ) $ (120 )
Non-cash investing and
financing activities: Financing obligation for contributions of
real property to pension plan $ - $ 15 Reduction of pension
obligation $ - $ 15 Increase (decrease) in capital expenditures due
to changes in accounts payable $ 50 $ (60 ) Conversion of operating
leases to capital leases $ 17 $ 111
SCHEDULE A Frontier Communications
Corporation Reconciliation of Non-GAAP Financial
Measures For the quarter ended For the year ended
($ in
millions)
December 31, 2017 September 30, 2017 December 31, 2016 December 31,
2017 December 31, 2016
EBITDA
Net Loss $ (1,029 ) $ (38 ) $ (80 ) $ (1,804 ) $ (373 ) Add back
(subtract): Income tax benefit (1,103 ) (31 ) (38 ) (1,383 ) (250 )
Interest expense 377 382 386 1,534 1,531 Investment and other
income (loss), net 2 (3 ) (13 ) (3 ) (27 ) Loss (gain) on
extinguishment of debt and debt exchanges (1 ) (1 )
- 88 7 Operating income
(loss) (1,754 ) 309 255 (1,568 ) 888 Depreciation and
amortization 514 539 562
2,184 2,031
EBITDA (1,240
) 848 817 616 2,919 Add
back: Acquisition and integration costs 10 1 49 25 436 Pension/OPEB
expense 21 23 27 94 104 Restructuring costs and other charges 27 14
80 82 91 Pension settlement costs 6 15 - 83 - Stock-based
compensation expense 4 4 3 14 24 Storm-related costs 13 9 - 22 -
Goodwill impairment 2,078 - -
2,748 -
Adjusted EBITDA
$ 919 $ 914 $
976 $ 3,684 $
3,574 EBITDA margin -55.9 % 37.6 % 33.9 % 6.7
% 32.8 % Adjusted EBITDA margin 41.5 % 40.6 % 40.4 % 40.4 % 40.2 %
Free Cash
Flow
Net cash provided from operating activities $ 665 $ 356 $ 714 $
1,850 $ 1,676 Add back (subtract): Capital expenditures - Business
operations (308 ) (268 ) (299 ) (1,154 ) (1,259 ) Capital
expenditures - Storm-related costs 23 3 - 26 - Acquisition and
integration costs 10 1 49 25 436 Deferred income taxes 1,099 32 43
1,385 206 Income tax benefit (1,103 ) (31 ) (38 ) (1,383 ) (250 )
Dividends on preferred stock (53 ) (54 ) (53 ) (214 ) (214 )
Non-cash gains, net(1) (4 ) (2 ) (35 ) (19 ) (73 ) Changes in
current assets and liabilities (188 ) 121 (230 ) 119 (54 ) Cash
refunded for income taxes 47 1 85 51 120 Restructuring costs and
other charges 27 14 80 82 91 Storm-related costs 13 9 - 22 -
Interest expense - commitment fees(2) - -
- - 10
Free
cash flow $ 228 $ 182
$ 316 $ 790 $
689 Dividends on preferred stock - - - - 54
Incremental interest on new debt - -
- - 178
Adjusted free
cash flow $ 228 $ 182
$ 316 $ 790 $
921 (1) Includes amortization of deferred
financing costs and other non-cash adjustments from the
consolidated cash flow data.
(2) Includes interest expense of $10
million for the nine months ended September 30, 2016 related to
commitment fees on bridge loan facilities.
SCHEDULE B
Frontier Communications Corporation Reconciliation of
Non-GAAP Financial Measures For the quarter ended
December 31, 2017 September 30, 2017 December 31, 2016
($ in millions,
except per share amounts)
Net Income(Loss)
Basic Earnings(Loss) PerShare
Net Income(Loss)
Basic Earnings(Loss) PerShare
Net Income
(Loss)
Basic Earnings(Loss) PerShare
Net loss attributable to Frontier common shareholders $
(1,082 ) $ (13.91 ) $ (92 ) $ (1.19 ) $ (133 ) $ (1.73 )
Acquisition and integration costs 10 1 49 Restructuring costs and
other charges 27 14 80 Pension settlement costs 6 15 - Loss (gain)
on extinguishment of debt and debt exchanges (1 ) (1 ) - Goodwill
impairment 2,078 - - Storm-related costs 13 9 - Effect of tax
reform (830 ) Certain other tax items (2) 8 (5 ) (17 ) Income tax
effect on above items: Acquisition and integration costs (3 ) (1 )
(1 ) Acquisition related interest expense - - 7 Restructuring costs
and other charges (10 ) (5 ) (28 ) Pension settlement costs (2 ) (5
) - Loss (gain) on extinguishment of debt and debt exchanges 1 - -
Goodwill impairment (256 ) - - Storm-related costs (5 )
(3 ) -
1,036 13.32 19 0.24 90 1.16 Adjusted net loss attributable
to Frontier common shareholders(3) $ (46 ) $ (0.59 ) $ (73 ) $
(0.94 ) $ (43 ) $ (0.55 ) For the year ended December 31,
2017 December 31, 2016
Net Income(Loss)
Basic Earnings(Loss) PerShare
Net Income(Loss)
Basic Earnings(Loss) PerShare
Net loss attributable to Frontier common shareholders $
(2,018 ) $ (25.99 ) $ (587 ) $ (7.61 ) Acquisition and
integration costs 25 436 Acquisition related interest expense (1) -
188 Restructuring costs and other charges 82 91 Pension settlement
costs 83 - Loss (gain) on extinguishment of debt and debt exchanges
88 - Goodwill impairment 2,748 - Storm-related costs 22 - Effect of
tax reform (830 ) Certain other tax items (2) 8 (31 ) Income tax
effect on above items: Acquisition and integration costs (9 ) (153
) Acquisition related interest expense - (66 ) Restructuring costs
and other charges (30 ) (32 ) Pension settlement costs (30 ) - Loss
(gain) on extinguishment of debt and debt exchanges (32 ) -
Goodwill impairment (394 ) - Storm-related costs (8 )
- 1,723 22.16 433 5.58 Dividends
on preferred stock - - 54
0.70 Adjusted net loss attributable to
Frontier common shareholders(3) $ (295 ) $ (3.79 ) $ (100 ) $ (1.29
) (1) Represents interest expense related to commitment fees
on bridge loan facilities in connection with the CTF Acquisition.
Also includes interest expense, prior to April 1, 2016, related to
the September 2015 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 For
the year ended
($ in
millions)
December 31, 2017 September 30, 2017 December 31, 2016 December 31,
2017 December 31, 2016
Adjusted Operating
Expenses
Total operating expenses $ 3,971
$ 1,942 $ 2,154 $
10,696 $ 8,008 Subtract:
Depreciation and amortization 514 539 562 2,184 2,031 Goodwill
impairment 2,078 - - 2,748 -
Acquisition and integration costs
10 1 49 25 436 Pension /OPEB expense 21 23 27 94 104 Restructuring
costs and other charges 27 14 80 82 91 Stock-based compensation
expense 4 4 3 14 24 Pension settlement costs 6 15 - 83 -
Storm-related costs 13 9 -
22 -
Adjusted operating
expenses $ 1,298 $ 1,337
$ 1,433 $ 5,444
$ 5,322 For the quarter ended
For the year ended December 31, 2017 September 30, 2017 December
31, 2016 December 31, 2017 December 31, 2016
Dividend Payout
Ratio
Numerator Dividends paid on common stock $ 47 $ 47 $ 123 $
266 $ 493 Less: Dividends on June 2015 common stock issuance
- - - - (18
)
$ 47 $ 47 $
123 $ 266 $ 475
Denominator Free cash flow (see Schedule A) $ 228 $
182 $ 316 $ 790 $ 689 Dividends on preferred stock - - - - 54
Incremental interest expense - -
- - 178
Adjusted free cash
flow $ 228 $ 182
$ 316 $ 790 $
921 Dividend payout ratio 21
% 26 % 39 % 34 %
52 %
SCHEDULE D Frontier Communications
Corporation Reconciliation of Non-GAAP Financial
Measures For the quarter ended December 31, 2017
September 30, 2017 June 30, 2017 March 31, 2017 December 31, 2016
September 30, 2016 June 30, 2016 March 31, 2016 Net
cash provided from (used by) operating activities $ 665 $ 356 $ 529
$ 300 $ 714 $ 321 $ 693 $ (52 ) Add back (subtract): Capital
expenditures - Business operations (308 ) (268 ) (263 ) (315 ) (299
) (403 ) (350 ) (207 ) Capital expenditures - Integration
(15 ) (14 ) (4 ) (1 ) (43 ) (11
) (36 ) (52 )
Operating free cash flow
342 74 262 (16 ) 372
(93 ) 307 (311 ) Capital
expenditures - Integration 15 14 4 1 43 11 36 52 Capital
expenditures - Storm-related costs 23 3 - - - - - - Acquisition and
integration costs 10 1 12 2 49 122 127 138 Deferred income taxes
1,099 32 213 41 43 (8 ) 52 119 Income tax benefit (1,103 ) (31 )
(210 ) (39 ) (38 ) (46 ) (48 ) (118 ) Dividends on preferred stock
(53 ) (54 ) (53 ) (54 ) (53 ) (54 ) (53 ) (54 ) Non-cash
(gains)/losses, net (4 ) (2 ) (4 ) (9 ) (35 ) (8 ) (9 ) (21 )
Changes in current assets and liabilities (188 ) 121 (48 ) 234 (230
) 230 (162 ) 108 Cash refunded for income taxes 47 1 - 3 85 3 - 32
Restructuring costs and other charges 27 14 29 12 80 11 - -
Storm-related costs 13 9 - - - - - - Interest expense - commitment
fees - - - -
- - - 10
Free cash flow $ 228 $
182 $ 205 $ 175
$ 316 $ 168
$ 250 $ (45 ) Dividends
on preferred stock - - - - - - - 54 Incremental interest on new
debt - - - -
- - - 178
Adjusted free cash flow $ 228
$ 182 $ 205 $
175 $ 316 $ 168
$ 250 $ 187
Trailing Twelve Months December 31, 2017 September
30, 2017 June 30, 2017 March 31, 2017 December 31, 2016 September
30, 2016 June 30, 2016 March 31, 2016 Net cash
provided from operating activities $ 1,850 $ 1,899 $ 1,864 $ 2,028
$ 1,676 $ 1,303 $ 1,327 $ 1,001 Add back (subtract): Capital
expenditures - Business operations (1,154 ) (1,145 ) (1,280 )
(1,367 ) (1,259 ) (1,145 ) (919 ) (747 ) Capital expenditures -
Integration (34 ) (62 ) (59 ) (91 )
(142 ) (151 ) (203 ) (195 )
Operating free cash flow 662 692 525
570 275 7 205 59 Capital
expenditures - Integration 34 62 59 91 142 151 203 195 Capital
expenditures - Storm-related costs 26 3 - - - - - - Acquisition and
integration costs 25 64 185 300 436 473 409 317 Deferred income
taxes 1,385 329 289 128 206 167 453 253 Income tax benefit (1,383 )
(318 ) (333 ) (171 ) (250 ) (285 ) (263 ) (253 ) Dividends on
preferred stock (214 ) (214 ) (214 ) (214 ) (214 ) (214 ) (227 )
(174 ) Non-cash (gains)/losses, net (19 ) (50 ) (56 ) (61 ) (73 )
(35 ) (93 ) (162 ) Changes in current assets and liabilities 119 77
186 72 (54 ) 65 (407 ) (77 ) Cash refunded for income taxes 51 89
91 91 120 35 25 22 Restructuring costs and other charges 82 135 132
103 91 11 1 1 Storm-related costs 22 9 - - - - - - Interest expense
- commitment fees - - -
- 10 10 62
137
Free cash flow $ 790
$ 878 $ 864 $
909 $ 689 $ 385
$ 368 $ 318
Dividends on preferred stock - - - - 54 107 174 174 Incremental
interest on new debt - - -
- 178 356
367 367
Adjusted free cash flow
$ 790 $ 878 $
864 $ 909 $ 921
$ 848 $ 909
$ 859
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180227006539/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 Apr 2024 to May 2024
Frontier Communications (NASDAQ:FTR)
Historical Stock Chart
From May 2023 to May 2024