- Total fourth quarter revenue of $2.12
billion, stable sequentially
- Net loss of $219 million in the fourth
quarter, with loss driven by goodwill impairment
- Adjusted EBITDA1 of $895 million, a
sequential increase driven by improved Consumer revenue
performance, continued strong expense management, and early
benefits from the company’s transformation program
- Transformation program initiatives
expanded further in the fourth quarter, and the program enters 2019
with strong momentum
Frontier Communications Corporation (NASDAQ:FTR) today reported
financial results for the fourth quarter and full year ended
December 31, 2018.
“I am very pleased that fourth quarter results reflect our
improving execution as well as initial benefits from our
transformation program,” said Dan McCarthy, President and CEO. “A
robust result in Consumer, together with strong expense management,
drove a sequential increase in fourth quarter Adjusted EBITDA,”
McCarthy added. “We continued to expand the scope of initiatives
underway in our transformation program in the fourth quarter, and
multiple teams are now scaling a range of solutions that were
developed through transformation initiatives. I look forward to
continued progress and expansion of the program over the course of
2019 and 2020 as we advance toward our targeted $500 million EBITDA
benefit.”
Consolidated Results
Consolidated revenue for the fourth quarter of 2018 was $2.12
billion. Within consolidated revenue, Consumer revenue was $1.09
billion, Commercial revenue was $942 million, and subsidy and other
regulatory revenue was $94 million.
Net loss for the fourth quarter of 2018 was $219 million,
representing a net loss per common share of $2.12. Net loss
included a goodwill impairment of $241 million ($214 million net of
tax). Fourth quarter Adjusted EBITDA was $895 million, for an
Adjusted EBITDA margin2 of 42.1%.
Net cash provided from operating activities for the fourth
quarter of 2018 was $603 million and operating free cash flow3 was
$358 million. For the full year 2018, net cash provided from
operating activities was $1,812 million and operating free cash
flow was $620 million.
Consumer Business Highlights
- Revenue of $1.09 billion.
- Customer churn of 1.94% (1.79% for
Legacy markets and 2.17% for CTF markets), with each measure
improving both sequentially and relative to the fourth quarter of
2017.
- Average Revenue Per Customer (ARPC) of
$88.37; excluding adoption of ASC 606, ARPC was $86.05, an increase
both sequentially and relative to the fourth quarter 2017.
Commercial Business Highlights
- Revenue of $942 million.
- Total commercial customers of 411,000
compared with 422,000 during the third quarter of 2018.
- Commercial wholesale revenue declined
sequentially, driven by wireless backhaul and voice revenue, and
Commercial SME revenue was stable sequentially.
Capital Structure and Capital Allocation
- As of December 31, 2018, Frontier’s
leverage ratio was 4.72:1.
- Frontier remains committed to reducing
debt and improving its financial leverage profile.
- Retired the $431 million principal
amount outstanding of its senior unsecured notes maturing October
1, 2018, as scheduled.
- Purchased $56 million principal amount
of its March 15, 2019 senior unsecured notes in the open market
during the fourth quarter of 2018.
- In January 2019 Frontier closed the
sale of wireless towers for $76 million. The transaction is
expected to be immaterial to revenue, earnings, and Adjusted
EBITDA.
Guidance
Frontier is issuing the following financial guidance for
2019:
- Adjusted EBITDA – $3.45 billion to
$3.55 billion
- Capital expenditures – Approximately
$1.15 billion
- Cash taxes – Less than $25 million
- Cash pension/OPEB – Approximately $175
million
- Cash interest expense – Approximately
$1.475 billion
- Operating free cash flow – $575 million
to $675 million
Non-GAAP Financial Measures
Frontier uses certain non-GAAP financial measures in evaluating
its performance, including EBITDA, EBITDA margin, Adjusted EBITDA,
Adjusted EBITDA margin, operating free cash flow, and adjusted
operating expenses, 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, pension
settlement costs, gains/losses on extinguishment of debt, and
depreciation and amortization. EBITDA margin is calculated by
dividing EBITDA by total revenue.
Adjusted EBITDA is defined as EBITDA, as described above,
adjusted to exclude acquisition and integration costs, certain
pension/OPEB expenses, restructuring costs and other charges,
stock-based compensation expense, goodwill impairment charges, and
certain other non-recurring items. Adjusted EBITDA margin is
calculated by dividing adjusted EBITDA by total revenue.
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 certain other
non-recurring items. Adjusting for these items allows investors to
better understand and analyze Frontier’s financial performance over
the periods presented.
Management defines operating free cash flow, a non-GAAP measure,
as net cash provided from operating activities less capital
expenditures. Management uses 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 this non-GAAP measure
is useful to investors in evaluating cash available to service debt
and pay dividends. This non-GAAP financial measure has certain
shortcomings; it does not represent the residual cash flow
available for discretionary expenditures, as items such as debt
repayments and preferred stock dividends are not deducted in
determining such measure. Management compensates for these
shortcomings by utilizing this non-GAAP financial measure in
conjunction with the comparable GAAP financial measure.
Adjusted operating expenses is defined as operating expenses
adjusted to exclude depreciation and amortization, acquisition and
integration costs, restructuring and other charges, goodwill
impairment charges, certain pension/OPEB expenses, stock-based
compensation expense, and certain other non-recurring items.
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
2018 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 7:30 P.M. Eastern Time on Tuesday, February 26, 2019, through
7:30 P.M. Eastern Time on Sunday, March 3, 2019 at 719-457-0820 or
888-203-1112. Use the passcode 3377896 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 events. Forward-looking statements address
Frontier’s expected 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: declines in revenue from
Frontier’s voice services, switched and non-switched access and
video and data services that it cannot stabilize or offset with
increases in revenue from other products and services; Frontier’s
ability to successfully implement strategic initiatives, including
opportunities to enhance revenue and realize operational
improvements; 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; risks related to disruptions in Frontier’s networks,
infrastructure and information technology that may result in
customer loss and/or incurrence of additional expenses; the impact
of potential information technology or data security breaches or
other cyber attacks or other disruptions; Frontier’s ability to
retain or attract new customers and to maintain relationships with
customers, employees or suppliers; Frontier’s ability to hire or
retain key personnel; Frontier’s ability to realize anticipated
benefits from recent acquisitions; Frontier’s ability to dispose of
certain assets or asset groups on terms that are attractive to it,
or at all; Frontier’s ability to effectively manage its operations,
operating expenses, capital expenditures, debt service requirements
and cash paid for income taxes and liquidity; Frontier’s ability to
defend against litigation and potentially unfavorable results from
current pending and future litigation; adverse changes in the
credit markets, which could impact the availability and cost of
financing; Frontier’s ability to repay or refinance its debt
through, among other things, accessing the capital markets, notes
repurchases and/or redemptions, tender offers and exchange offers;
adverse changes in the ratings given to Frontier’s debt securities
by nationally accredited ratings organizations; 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 requirements that could limit Frontier’s ability
to transfer cash among its subsidiaries or dividend funds up to the
parent company; 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 revenue 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
funding obligations and the risk of penalties or obligations to
return certain CAF II funds; Frontier’s ability to effectively
manage service quality and meet mandated service quality metrics;
the effects of changes in accounting policies or practices,
including potential future impairment charges with respect to
intangible assets; the effects of changes in income tax rates, tax
laws, regulations or rulings, or federal or state tax assessments,
including the risk that such changes may benefit Frontier’s
competitors more than it, as wells potential future decreases in
the value of Frontier’s deferred tax assets; the effects of
increased medical expenses and pension and postemployment expenses;
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 its pension plans; the effects of changes in both
general and local economic conditions in the markets that Frontier
serves; the effects of severe weather events or other natural or
man-made disasters, which may increase operating and capital
expenses or adversely impact customer revenue; 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.
_________________
1 See “Non-GAAP Measures” for a description of this measure and its
calculation. See Schedule A for a reconciliation to net
income/(loss). 2 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 of
EBITDA to net loss. 3 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 A for a reconciliation to
net cash provided from operating activities.
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, 2018 (1)
September 30, 2018 (1) December 31, 2017 December 31, 2018 (1)
December 31, 2017
Statement of Operations Data
Revenue $ 2,124 $ 2,126 $ 2,217 $ 8,611 $ 9,128 Operating
expenses: Network access expenses 347 353 388 1,441 1,597 Network
related expenses 461 476 490 (2) 1,898 1,958
(2)
Selling, general and administrative expenses 441 445 457 (2) 1,815
2,017
(2)
Depreciation and amortization 492 471 514 1,954 2,184 Goodwill
impairment 241 400 2,078 641 2,748 Acquisition and integration
costs - - 10 - 25 Restructuring costs and other charges 15
14 27 35 82 Total operating expenses
1,997 2,159 3,964 (2) 7,784
10,611
(2)
Operating income (loss) 127 (33) (1,747) (2) 827 (1,483)
(2)
Investment and other income (loss), net (3) 3 (3) (2) 13 1
(2)
Pension settlement costs 7 9 6 41 83 Gain (Loss) on early
extinguishment of debt and debt exchanges 1 (2) 1 32 (88) Interest
expense 388 389 377 1,536 1,534
Loss before income taxes (270) (430) (2,132) (705) (3,187)
Income tax benefit (51) (4) (1,103)
(62) (1,383)
Net loss (219) (426) (1,029)
(643) (1,804) Less: Dividends on preferred stock -
- 53 107 214
Net loss attributable
to Frontier common shareholders $ (219) $ (426) $
(1,082) $ (750) $ (2,018) Weighted average shares
outstanding - basic and diluted(3) 103,680 103,665 77,805 89,683
77,736
Basic and diluted net loss per common share $
(2.12) $ (4.11) $ (13.91) $ (8.37) $ (25.99)
Other
Financial Data: Capital expenditures - Business operations $
245 $ 329 $ 308 $ 1,192 $ 1,154 Capital expenditures - Integration
activities $ - $ - $ 15 $ - $ 34 Dividends declared - Common stock
$ - $ - $ 47 $ - $ 266 Dividends declared - Preferred stock $ - $ -
$ 53 $ 107 $ 214 (1) We adopted Accounting Standard Update
2014-09, “Revenue from Contracts with Customers (ASC 606)” on
January 1, 2018, using the modified retrospective application. This
method does not impact the prior periods, which continue to reflect
the accounting treatment prior to the adoption of ASC 606. As a
result, for items that were affected by our adoption of ASC 606,
financial results of periods prior to January 1, 2018 are not
comparable to the current period financial results. To provide
comparability to our results, we provide a supplemental schedule
(see Schedule D) which contains certain financial information on a
pre adoption of ASC 606 basis. (2) Effective January 1,
2018, Frontier adopted ASU 2017-07, “Improving the Presentation of
Net Periodic Pension Cost and Net Periodic Postretirement Benefit
Cost.” The standard requires certain benefit costs to be
reclassified from operating expenses to non-operating expenses.
This change in policy was applied using a retrospective approach
and accordingly we have reclassified $1 and $2 million of net
operating expenses as non-operating expense for the quarter and
year ended December 31, 2017, respectively. Additional pension
settlement costs of $6 million and $83 million for the quarter and
year ended December 31, 2017, respectively, were reclassified from
operating expense to non-operating expense. (3) As of
December 31, 2018 and September 30, 2018, there were approximately
106 million of common shares outstanding and 0 shares of preferred
stock.
Frontier Communications Corporation
Consolidated Financial Data
For the quarter ended For the year ended December 31,
2018 (1) September 30, 2018 (1) December 31, 2017 December 31, 2018
(1) December 31, 2017
($ in
millions)
Selected Statement of Operations Data Revenue:
Data and Internet services $ 959 $ 961 $ 939 $ 3,878 $ 3,862 (2)
Voice services 668 669 687 2,721 2,864 Video services 275 260 310
1,085 1,304 Other 128 141 91 544
322 Customer revenue 2,030 2,031 2,027 8,228 8,352 (2) Subsidy and
other regulatory revenue 94 95 190 383
776 Total revenue $ 2,124 $ 2,126 $ 2,217 $ 8,611 $ 9,128
(2)
Other Financial Data Revenue: Consumer $
1,088 $ 1,069 $ 1,086 $ 4,380 $ 4,476 Commercial 942
962 941 3,848 3,876 (2) Customer revenue 2,030
2,031 2,027 8,228 8,352 (2) Subsidy and other regulatory revenue
94 95 190 383 776 Total revenue
$ 2,124 $ 2,126 $ 2,217 $ 8,611 $ 9,128 (2) (1) We adopted
Accounting Standard Update 2014-09, “Revenue from Contracts with
Customers (ASC 606)” on January 1, 2018, using the modified
retrospective application. This method does not impact the prior
periods, which continue to reflect the accounting treatment prior
to the adoption of ASC 606. As a result, for items that were
affected by our adoption of ASC 606, financial results of periods
prior to January 1, 2018 are not comparable to the current period
financial results. To provide comparability to our results, we
provide a supplemental schedule (see Schedule D) which contains
certain financial information on a pre adoption of ASC 606 basis.
(2) Includes revenue from Frontier Secure Strategic
Partnerships business, which was sold in May of 2017, $40 million
for the year ended December 31, 2017.
Frontier Communications Corporation Consolidated
Financial and Operating Data
For the quarter ended For the year ended December 31,
2018 September 30, 2018 December 31, 2017 December 31, 2018
December 31, 2017
Customers (in thousands) 4,471
4,574 4,850 4,471 4,850
Consumer customer metrics
Customers (in thousands) 4,060 4,152 4,397 4,060 4,397 Net customer
additions (losses) (92) (86) (89) (337) (494) Average monthly
consumer revenue per customer $ 88.37 (1) $ 84.92 (1) $ 81.61 $
86.26 (1) $ 80.96 Customer monthly churn 1.94% 2.03% 1.98% 1.97%
2.17%
Commercial customer metrics Customers (in
thousands) 411 422 453 411 453
Broadband subscriber metrics (in
thousands) Broadband subscribers 3,735 3,802 3,938 3,735 3,938
Net subscriber additions (losses) (67) (61) (63) (203) (333)
Video (excl. DISH) subscriber metrics (in thousands) Video
subscribers 838 873 961 838 961 Net subscriber additions (losses)
(35) (29) (20) (123) (184)
Video - DISH subscriber
metrics (in thousands) DISH subscribers 205 211 235 205 235 Net
subscriber additions (losses) (6) (8) (9) (30) (39)
Employees 21,173 21,375 22,736 21,173 22,736 (1) We
adopted Accounting Standard Update 2014-09, “Revenue from Contracts
with Customers (ASC 606)” on January 1, 2018, using the modified
retrospective application. This method does not impact the prior
periods, which continue to reflect the accounting treatment prior
to the adoption of ASC 606. As a result, for items that were
affected by our adoption of ASC 606, financial results of periods
prior to January 1, 2018 are not comparable to the current period
financial results. To provide comparability to our results, we
provide a supplemental schedule (see Schedule D) which contains
certain financial information on a pre adoption of ASC 606 basis.
Frontier Communications
Corporation
Condensed Consolidated Balance Sheet Data
($ in
millions)
December 31, 2018 December 31, 2017
ASSETS
Current assets: Cash and cash equivalents $ 354 $ 362 Accounts
receivable, net 723 819 Other current assets 253 142
Total current assets 1,330 1,323 Property, plant and
equipment, net 14,187 14,377 Other assets - principally goodwill
8,142 9,184 Total assets $ 23,659 $ 24,884
LIABILITIES AND
EQUITY
Current liabilities: Long-term debt due within one year $ 814 $ 656
Accounts payable and other current liabilities 1,747
1,852 Total current liabilities 2,561 2,508 Deferred income
taxes and other liabilities 3,140 3,132 Long-term debt 16,358
16,970 Equity 1,600 2,274 Total liabilities and
equity $ 23,659 $ 24,884
Frontier Communications
Corporation Consolidated Cash Flow Data
For the year ended
($ in
millions)
December 31, 2018 December 31, 2017
Cash flows provided
from (used by) operating activities: Net loss $ (643) $ (1,804)
Adjustments to reconcile net loss to net cash provided from (used
by) operating activities: Depreciation and amortization 1,954 2,184
(Gain) Loss on extinguishment of debt and debt exchanges (32) 88
Special termination benefits - 5 Pension settlement costs 41 83
Stock-based compensation expense 18 14 Amortization of deferred
financing costs 34 33 Other adjustments (32) (14) Deferred income
taxes (67) (1,385) Goodwill impairment 641 2,748 Change in accounts
receivable 65 122 Change in accounts payable and other liabilities
(141) (298) Change in prepaid expenses, income taxes, and other
assets (26) 74
Net cash provided from operating
activities 1,812 1,850
Cash flows provided from (used
by) investing activities: Capital expenditures - Business
operations (1,192) (1,154) Capital expenditures - Integration
activities - (34) Proceeds on sale of assets 11 110 Other 5
24
Net cash used by investing activities (1,176)
(1,054)
Cash flows provided from (used by) financing
activities: Long-term debt payments (2,515) (1,811) Proceeds
from long-term debt borrowings 1,840 1,500 Proceeds from revolving
debt 525 - Repayment of revolving debt (250) - Financing costs paid
(43) (15) Dividends paid on common stock - (266) Dividends paid on
preferred stock (107) (214) Premium paid to retire debt (17) (86)
Capital lease obligation payments (36) (42) Other (5)
(8)
Net cash used by financing activities (608) (942)
Increase (Decrease) in cash, cash equivalents, and restricted cash
28 (146) Cash, cash equivalents, and restricted cash at January 1,
376 522
Cash, cash equivalents, and
restricted cash at December 31, $ 404 $ 376
Supplemental cash flow information: Cash paid (received)
during the period for: Interest $ 1,507 $ 1,548 Income tax
payments (refunds), net $ 4 $ (51)
SCHEDULE A Frontier Communications
Corporation Reconciliation of Non-GAAP Financial
Measures For the quarter ended For the year ended
($ in
millions)
December 31, 2018 September 30, 2018 December 31, 2017 December 31,
2018 December 31, 2017
EBITDA
Net loss $ (219) $ (426) $ (1,029) $ (643) $ (1,804) Add back
(subtract): Income tax benefit (51) (4) (1,103) (62) (1,383)
Interest expense 388 389 377 1,536 1,534 Investment and other
(income) loss, net 3 (3) 3 (13) (1) Pension settlement costs 7 9 6
41 83 (Gain) Loss on extinguishment of debt (1) 2
(1) (32) 88 Operating income (loss) 127 (33)
(1,747) 827 (1,483) Depreciation and amortization 492
471 514 1,954 2,184
EBITDA $
619 $
438 $
(1,233) $
2,781 $
701 Add back: Acquisition and integration costs - -
10 - 25 Pension/OPEB expense 19 21 20 85 92 Restructuring costs and
other charges 15 14 27 35 82 Stock-based compensation expense 4 5 4
18 14 Storm-related costs (insurance proceeds) (3) - 13 (3) 22 Work
stoppage costs - - - 8 - Goodwill impairment 241 400
2,078 641 2,748
Adjusted EBITDA
$ 895 $ 878 $ 919
$ 3,565 $ 3,684 EBITDA margin
29.1% 20.6% -55.6% 32.3% 7.7% Adjusted EBITDA margin 42.1% 41.3%
41.5% 41.4% 40.4%
Free Cash
Flow
Net cash provided from operating activities $ 603 $ 286 $ 665 $
1,812 $ 1,850 Add back (subtract): Capital expenditures - Business
operations (245) (329) (308) (1,192) (1,154) Capital expenditures -
Integration activities - - (15) -
(34)
Operating free cash flow $ 358
$ (43) $ 342 $ 620
$ 662 SCHEDULE B Frontier
Communications Corporation Reconciliation of Non-GAAP
Financial Measures
For the quarter ended For the
year ended December 31, 2018 September 30, 2018 December 31, 2017
December 31, 2018 December 31, 2017
($ in millions,
except per share amounts)
Net Income(Loss)
BasicEarnings(Loss) PerShare
Net Income(Loss)
BasicEarnings(Loss) PerShare
Net Income(Loss)
BasicEarnings(Loss) PerShare
Net Income(Loss)
BasicEarnings(Loss) PerShare
Net Income(Loss)
BasicEarnings(Loss) PerShare
Net loss attributable to Frontier common shareholders $
(219) $ (2.12) $ (426) $ (4.11) $ (1,082) $ (13.91) $ (750) $
(8.37) $ (2,018) $ (25.99) Acquisition and integration costs
- - 10 - 25 Restructuring costs and other charges 15 14 27 35 82
Pension settlement costs 7 9 6 41 83 (Gain) Loss on extinguishment
of debt and debt exchanges (1) 2 (1) (32) 88 Goodwill impairment
241 400 2,078 641 2,748 Storm-related costs (insurance proceeds)
(3) - 13 (3) 22 Work stoppage costs - - - 8 - Effect of tax reform
- - (830) - (830) Certain other tax items (1) (14) 46 8 24 8 Income
tax effect on above items: Acquisition and integration costs - -
(3) - (9) Restructuring costs and other charges (4) (3) (10) (8)
(30) Pension settlement costs (2) (2) (2) (10) (30) (Gain) Loss on
extinguishment of debt and debt exchanges - (1) 1 8 (32) Goodwill
impairment (27) (46) (256) (73) (394) Storm-related costs
(insurance proceeds) 1 - (5) 1 (8) Work stoppage costs -
- -
(2) - $ 213 $ 2.05 $ 419
$ 4.04 $ 1,036 $ 13.32 $ 630 $ 7.02 $ 1,723 $ 22.16 Adjusted net
loss attributable to Frontier common shareholders(2) $ (6) $ (0.06)
$ (7) $ (0.07) $ (46) $ (0.59) $ (120) $ (1.34) $ (295) $ (3.79)
(1) Includes impact arising from federal research and
development credits, changes in certain deferred tax balances,
state tax law changes, state filing method change, and the net
impact of uncertain tax positions.
(2) Adjusted net 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, 2018 September 30, 2018 December 31, 2017 December 31,
2018 December 31, 2017
Adjusted Operating
Expenses
Total operating expenses $ 1,997
$ 2,159 $ 3,964 (1)
$
7,784 $ 10,611 (1) Subtract:
Depreciation and amortization 492 471 514 1,954 2,184 Goodwill
impairment 241 400 2,078 641 2,748 Acquisition and integration
costs - - 10 - 25 Pension/OPEB expense 19 21 20 (1) 85 92 (1)
Restructuring costs and other charges 15 14 27 35 82 Stock-based
compensation expense 4 5 4 18 14 Storm-related costs (insurance
proceeds) (3) - 13 (3) 22 Work stoppage costs - -
- 8 -
Adjusted operating expenses
$ 1,229 $ 1,248 $ 1,298
$ 5,046 $ 5,444 (1) Effective
January 1, 2018, Frontier adopted ASU 2017-07, “Improving the
Presentation of Net Periodic Pension Cost and Net Periodic
Postretirement Benefit Cost.” The standard requires certain benefit
costs to be reclassified from operating expenses to non-operating
expenses. This change in policy was applied using a retrospective
approach and accordingly we have reclassified $1 and $2 million of
net operating expenses as non-operating expense for the quarter and
year ended December 31, 2017, respectively. Additional pension
settlement costs of $6 million and $83 million for the quarter and
year ended December 31, 2017, respectively, were reclassified from
operating expense to non-operating expense.
SCHEDULE D
Comparability Disclaimer:
We adopted Accounting Standard Update 2014-09, “Revenue from
Contracts with Customers (ASC 606)” on January 1, 2018, using the
modified retrospective application. This method does not impact the
prior periods, which continue to reflect the accounting treatment
prior to the adoption of ASC 606. As a result, for items that were
affected by our adoption of ASC 606, financial results of periods
prior to January 1, 2018 are not comparable to the current period
financial results. To provide comparability to our results, we
provide the following supplemental schedule which contains certain
financial information on a pre-adoption of ASC 606 basis.
Frontier Communications Corporation Consolidated
Financial Data As Reported
Amounts Excluding Adoption of ASC 606 For the quarter ended For the
quarter ended
($ in
millions)
December 31, 2018 September 30, 2018 December 31, 2018 September
30, 2018
Selected Statement of Operations Data
Revenue: Data and Internet services $ 959 $ 961 $ 947 $ 938 Voice
services 668 669 617 634 Video services 275 260 291 287 Other
128 141 92 88 Revenue from contracts
with customers 2,030 2,031 1,947 1,947 Subsidy and other regulatory
revenue 94 95 176 173 Total revenue $
2,124 $ 2,126 $ 2,123 $ 2,120
Other Revenue Data
Revenue: Consumer $ 1,088 $ 1,069 $ 1,060 $ 1,047 Commercial
942 962 887 900 Revenue from contracts with
customers 2,030 2,031 1,947 1,947 Subsidy and other regulatory
revenue 94 95 176 173 Total revenue $
2,124 $ 2,126 $ 2,123 $ 2,120 As Reported Amounts
Excluding Adoption of ASC 606 For the quarter ended For the quarter
ended
($ in
millions)
December 31, 2018 September 30, 2018 December 31, 2018 September
30, 2018
Statement of Operations Data Revenue $ 2,124
$ 2,126 $ 2,123 $ 2,120 Operating expenses: Network access expenses
347 353 349 354 Network related expenses 461 476 461 476 Selling,
general and administrative expenses 441 445 445 447 Depreciation
and amortization 492 471 491 471 Goodwill impairment 241 400 241
400 Restructuring costs and other charges 15 14
15 14 Total operating expenses $ 1,997 $ 2,159 $
2,002 $ 2,162 Operating income (loss) 127 (33) 121 (42)
Investment and other income, net (3) 3 (3) 3 Pension
settlement costs 7 9 7 9 Gain (Loss) on extinguishment of debt 1
(2) 1 (2) Interest expense 388 389 388
389 Loss before income taxes (270) (430) (276) (439) Income
tax benefit (51) (4) (54) (4)
Net loss (219) (426) (222) (435) Less: Dividends on
preferred stock - - - - Net loss
attributable to Frontier common shareholders $ (219) $ (426) $
(222) $ (435) Other financial data: Consumer ARPC $ 88.37 $
84.92 $ 86.05 $ 83.20
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version on businesswire.com: https://www.businesswire.com/news/home/20190226006149/en/
INVESTORS:Luke SzymczakVice
President(203) 614-5044luke.szymczak@ftr.comMEDIA:Brigid SmithAssistant Vice President(203)
614-5042brigid.smith@ftr.com
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