UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2021~~2022

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________to__________

Commission file number: 001-11001

FRONTIER COMMUNICATIONS PARENT, INC.

(Exact name of registrant as specified in its charter)


Delaware		86-2359749
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

401 Merritt 7
Norwalk, Connecticut		06851
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code: (203) 614-5600

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.01 per share

FYBR

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “accelerated filer,” “large accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨x Accelerated filer ¨ Non-accelerated filer x¨

Smaller reporting company x¨ Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

The number of shares outstanding of the registrant’s Common Stock as of October ~~29, 2021~~27, 2022 was ~~244,408,000.~~245,004,000.

PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETSSHEETS

($ in millions and shares in thousands, except for per-share amounts)

(Unaudited)
Successor
Predecessor
September 30, 2021
December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents
$
1,211
$
1,829
Accounts receivable, less allowances of $49 and $130, respectively
452
553
Contract acquisition costs
-
97
Prepaid expenses
94
90
Income taxes and other current assets
30
85
Total current assets
1,787
2,654
Property, plant and equipment, net
8,918
12,931
Other intangibles, net
4,307
677
Other assets
376
533
Total assets
$
15,388
$
16,795
LIABILITIES AND EQUITY (DEFICIT)
Current liabilities:
Long-term debt due within one year
$
15
$
5,781
Accounts payable
583
540
Advanced billings
200
202
Accrued other taxes
208
204
Accrued interest
125
47
Pension and other postretirement benefits
48
48
Other current liabilities
301
318
Total current liabilities
1,480
7,140
Deferred income taxes
372
343
Pension and other postretirement benefits
1,731
2,195
Other liabilities
424
452
Long-term debt
6,996
-
Total liabilities not subject to compromise
11,003
10,130
Liabilities subject to compromise
-
11,565
Total liabilities
11,003
21,695
Equity (Deficit):
Successor common stock, $0.01 par value (1,750,000 shares authorized,
244,407 issued and outstanding at September 30, 2021)
2
-
Predecessor common stock, $0.25 par value (175,000 authorized shares,
106,025 issued, and 104,793 outstanding at December 31, 2020)
-
27
Additional paid-in capital
4,114
4,817
Retained earnings (deficit)
225
(8,975)
Accumulated other comprehensive income (loss), net of tax
44
(755)
Treasury common stock
-
(14)
Total equity (deficit)
4,385
(4,900)
Total liabilities and equity (deficit)
$
15,388
$
16,795


	(Unaudited)
	September 30, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	230	$	2,127
Short-term investments		2,325		-
Accounts receivable, less allowances of $47 and $57, respectively		422		458
Prepaid expenses		80		73
Income taxes and other current assets		21		30
Total current assets		3,078		2,688

Property, plant and equipment, net		10,847		9,199
Other intangibles, net		3,986		4,227
Other assets		362		367
Total assets	$	18,273	$	16,481

LIABILITIES AND EQUITY
Current liabilities:
Long-term debt due within one year	$	15	$	15
Accounts payable		995		535
Advanced billings		195		197
Accrued other taxes		179		183
Accrued interest		178		76
Pension and other postretirement benefits		46		46
Other current liabilities		369		399
Total current liabilities		1,977		1,451

Deferred income taxes		554		387
Pension and other postretirement benefits		1,193		1,672
Other liabilities		496		403
Long-term debt		9,120		7,968
Total liabilities		13,340		11,881

Equity:
Common stock, $0.01 par value (1,750,000 authorized shares, 244,999
and 244,416 shares issued and outstanding at September 30, 2022 and
December 31, 2021, respectively)		2		2
Additional paid-in capital		4,171		4,124
Retained earnings		700		414
Accumulated other comprehensive income, net of tax		60		60
Total equity		4,933		4,600
Total liabilities and equity	$	18,273	$	16,481

The accompanying Notes are an integral part of these unaudited Consolidated Financial Statements.

‎

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~INCOME

($ in millions and shares in thousands, except for per-share amounts)

(Unaudited)

Successor
Predecessor
For the three months
For the three months
ended September 30,
ended September 30,
2021
2020
Revenue
$
1,576
$
1,726
Operating expenses:
Network access expenses
177
226
Network related expenses
413
431
Selling, general and administrative expenses
421
404
Depreciation and amortization
273
392
Restructuring costs and other charges
8
3
Total operating expenses
1,292
1,456
Operating income
284
270
Investment and other loss, net
(37)
(14)
Reorganization items, net
-
(131)
Interest expense (See note 3)
(90)
(121)
Income before income taxes
157
4
Income tax (benefit) expense
31
(11)
Net income
126
15
Basic net earnings per share
attributable to Frontier common shareholders
$
0.52
$
0.14
Diluted net earnings per share
attributable to Frontier common shareholders
$
0.51
$
0.14
Total weighted average shares outstanding - basic
244,403
104,526
Total weighted average shares outstanding - diluted
245,667
104,866


	For the three months		For the three months
	ended September 30,		ended September 30,
	2022		2021

Revenue	$	1,444	$	1,576

Operating expenses:
Cost of service		544		590
Selling, general, and administrative expenses		431		421
Depreciation and amortization		296		273
Restructuring costs and other charges		4		8
Total operating expenses		1,275		1,292


Operating income		169		284

Investment and other income (loss), net (See Note 10)		211		(37)
Pension settlement costs		(50)		-
Interest expense		(135)		(90)

Income before income taxes		195		157
Income tax expense		75		31

Net income	$	120	$	126

Basic net earnings per share
attributable to Frontier common shareholders	$	0.49	$	0.52

Diluted net earnings per share
attributable to Frontier common shareholders	$	0.49	$	0.51

Total weighted average shares outstanding - basic		244,984		244,403

Total weighted average shares outstanding - diluted		245,212		245,667

The accompanying Notes are an integral part of these unaudited Consolidated Financial Statements.

‎

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMFRONTIER COMMUNICATIONSMUNICATIONS PARENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~INCOME

($ in millions and shares in thousands, except for per-share amounts)

(Unaudited)

Successor
Predecessor
For the five months
For the four months
For the nine months
ended September 30,
ended April 30,
ended September 30,
2021
2021
2020
Revenue
$
2,637
$
2,231
$
5,460
Operating expenses:
Network access expenses
304
264
767
Network related expenses
682
566
1,305
Selling, general and administrative expenses
690
537
1,255
Depreciation and amortization
452
506
1,204
Loss on disposal of Northwest Operations
-
-
160
Restructuring costs and other charges
19
7
87
Total operating expenses
2,147
1,880
4,778
Operating income
490
351
682
Investment and other income (loss), net
(39)
1
(29)
Pension settlement costs
-
-
(159)
Reorganization items, net
-
4,171
(273)
Interest expense (See note 3)
(152)
(118)
(664)
-
Income (Loss) before income taxes
299
4,405
(443)
Income tax (benefit) expense
74
(136)
(91)
-
Net income (loss)
225
4,541
(352)
Basic net earnings (loss) per share
attributable to Frontier common shareholders
$
0.92
$
43.42
$
(3.37)
Diluted net earnings (loss) per share
attributable to Frontier common shareholders
$
0.92
$
43.28
$
(3.37)
Total weighted average shares outstanding - basic
244,402
104,584
104,460
Total weighted average shares outstanding - diluted
245,600
104,924
104,460


	Successor				Predecessor
	For the nine months		For the five months		For the four months
	ended September 30,		ended September 30,		ended April 30,
	2022		2021		2021

Revenue	$	4,350	$	2,637	$	2,231

Operating expenses:
Cost of service		1,643		986		830
Selling, general, and administrative expenses		1,293		690		537
Depreciation and amortization		870		452		506
Restructuring costs and other charges		88		19		7
Total operating expenses		3,894		2,147		1,880


Operating income		456		490		351

Investment and other income (loss), net (See Note 10)		410		(39)		1
Pension settlement costs		(50)		-		-
Reorganization items, net		-		-		4,171
Interest expense (See Note 8)		(356)		(152)		(118)

Income before income taxes		460		299		4,405
Income tax expense (benefit)		174		74		(136)

Net income	$	286	$	225	$	4,541

Basic net earnings per share
attributable to Frontier common shareholders	$	1.17	$	0.92	$	43.42

Diluted net earnings per share
attributable to Frontier common shareholders	$	1.17	$	0.92	$	43.28

Total weighted average shares outstanding - basic		244,711		244,402		104,584

Total weighted average shares outstanding - diluted		245,080		245,600		104,924

The accompanying Notes are an integral part of these unaudited Consolidated Financial Statements.

‎

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIESSUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ~~(LOSS)~~

($ in millions)

(Unaudited)

Successor
Predecessor
For the three months
For the three months
ended September 30,
ended September 30,
2021
2020
Net income
$
126
$
15
Other comprehensive income, net of tax
3
155
Comprehensive income
$
129
$
170
Successor
Predecessor
For the five months
For the four months
For the nine months
ended September 30,
ended April 30,
ended September 30,
2021
2021
2020
Net income (loss)
$
225
$
4,541
$
(352)
Other comprehensive income (loss), net of tax
44
359
(182)
Comprehensive income (loss)
$
269
$
4,900
$
(534)


	For the three months		For the three months
	ended September 30,		ended September 30,
	2022		2021

Net income	$	120	$	126
Other comprehensive (loss) income, net of tax		(2)		3

Comprehensive income	$	118	$	129


	Successor				Predecessor
	For the nine months		For the five months		For the four months
	ended September 30,		ended September 30,		ended April 30,
	2022		2021		2021

Net income	$	286	$	225	$	4,541
Other comprehensive income, net of tax		-		44		359

Comprehensive income	$	286	$	269	$	4,900

The accompanying Notes are an integral part of these unaudited Consolidated Financial Statements.

‎

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONFRONTIER COMMUNICATIONSS PARENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)

($ in millions and shares in thousands)

(Unaudited)



								Accumulated
				Additional		Retained		Other		Treasury			Total
	Common Stock			Paid-In		Earnings		Comprehensive		Common Stock			Equity
	Shares	Amount		Capital		(Deficit)		Income (Loss)		Shares	Amount		(Deficit)
Balance at January 1, 2021	106,025	$	27	$	4,817	$	(8,975)	$	(755)	(1,232)	$	(14)	$	(4,900)
Stock plans	-		-		-		-		-	(122)		(1)		(1)
Net income	-		-		-		60		-	-		-		60
Other comprehensive
income, net of tax	-		-		-		-		11	-		-		11
Balance at
March 31, 2021 (Predecessor)	106,025		27		4,817		(8,915)		(744)	(1,354)		(15)		(4,830)
Stock plans	-		-		1		-		-	-		-		1
Net income	-		-		-		4,481		-	-		-		4,481
Other comprehensive
income, net of tax	-		-		-		-		348	-		-		348
Cancellation of Predecessor equity	(106,025)		(27)		(4,818)		4,434		396	1,354		15		-
Issuance of Successor common stock	244,401		2		4,106		-		-	-		-		4,108
Balance at
April 30, 2021 (Predecessor)	244,401	$	2	$	4,106	$	-	$	-	-	$	-	$	4,108


Balance at
April 30, 2021 (Successor)	244,401	$	2	$	4,106	$	-	$	-	-	$	-	$	4,108
Stock plans	-		-		-		-		-	-		-		-
Net income	-		-		-		99		-	-		-		99
Other comprehensive
loss, net of tax	-		-		-		-		41	-		-		41
Balance at
June 30, 2021 (Successor)	244,401	$	2	$	4,106	$	99	$	41	-	$	-	$	4,248
Stock plans	6		-		8		-		-	-		-		8
Net income	-		-		-		126		-	-		-		126
Other comprehensive
loss, net of tax	-		-		-		-		3	-		-		3
Balance at September 30, 2021 (Successor)	244,407	$	2	$	4,114	$	225	$	44	-	$	-	$	4,385


															For the nine months ended September 30, 2022 (Successor)
	For the nine months ended September 30, 2020																					Accumulated
								Accumulated										Additional				Other
				Additional				Other		Treasury					Common Stock			Paid-In		Retained		Comprehensive		Total
	Common Stock			Paid-In		Accumulated		Comprehensive		Common Stock			Total		Shares	Amount		Capital		Earnings		Income		Equity
	Shares	Amount		Capital		Deficit		Loss		Shares	Amount		Equity
Balance at January 1, 2020	106,025	$	27	$	4,815	$	(8,573)	$	(650)	(894)	$	(13)	$	(4,394)
Balance at January 1, 2022															244,416	$	2	$	4,124	$	414	$	60	$	4,600
Stock plans	-		-		1		-		-	(143)		-		1	60		-		15		-		-		15
Net loss	-		-		-		(186)		-	-		-		(186)
Net income															-		-		-		65		-		65
Other comprehensive
loss, net of tax															-		-		-		-		(2)		(2)
Balance at March 31, 2022															244,476	$	2	$	4,139	$	479	$	58	$	4,678
Stock plans															493		-		13		-		-		13
Net income															-		-		-		101		-		101
Other comprehensive
income, net of tax	-		-		-		-		86	-		-		86	-		-		-		-		4		4
Balance at March 31, 2020	106,025		27		4,816		(8,759)		(564)	(1,037)		(13)		(4,493)
Balance at June 30, 2022															244,969	$	2	$	4,152	$	580	$	62	$	4,796
Stock plans	-		-		-		-		-	(77)		-		-	30		-		19		-		-		19
Net loss	-		-		-		(181)		-	-		-		(181)
Net income															-		-		-		120		-		120
Other comprehensive
income, net of tax	-		-		-		-		(423)	-		-		(423)	-		-		-		-		(2)		(2)
Balance at September 30, 2022															244,999	$	2	$	4,171	$	700	$	60	$	4,933

Balance at June 30, 2020	106,025	$	27	$	4,816	$	(8,940)	$	(987)	(1,114)	$	(13)	$	(5,097)
Stock plans	-		-		2		-		-	(118)		(1)		1
Net loss	-		-		-		15		-	-		-		15
Other comprehensive
income, net of tax	-		-		-		-		155	-		-		155
Balance at
September 30, 2020	106,025	$	27	$	4,818	$	(8,925)	$	(832)	(1,232)	$	(14)	$	(4,926)


	For the nine months ended September 30, 2021
								Accumulated
				Additional				Other		Treasury			Total
	Common Stock			Paid-In		Accumulated		Comprehensive		Common Stock			Equity
	Shares	Amount		Capital		Deficit		Income (Loss)		Shares	Amount		(Deficit)
Balance at January 1, 2021	106,025	$	27	$	4,817	$	(8,975)	$	(755)	(1,232)	$	(14)	$	(4,900)
Stock plans	-		-		-		-		-	(122)		(1)		(1)
Net income	-		-		-		60		-	-		-		60
Other comprehensive
income, net of tax	-		-		-		-		11	-		-		11
Balance at March 31, 2021 (Predecessor)	106,025	$	27	$	4,817	$	(8,915)	$	(744)	(1,354)	$	(15)	$	(4,830)

Stock plans	-		-		1		-		-	-		-		1
Net income	-		-		-		4,481		-	-		-		4,481
Other comprehensive
income, net of tax	-		-		-		-		348	-		-		348
Cancellation of Predecessor equity	(106,025)		(27)		(4,818)		4,434		396	1,354		15		-
Issuance of Successor common stock	244,401		2		4,106		-		-	-		-		4,108
Balance at April 30, 2021 (Predecessor)	244,401	$	2	$	4,106	$	-	$	-	-	$	-	$	4,108


Balance at April 30, 2021 (Successor)	244,401	$	2	$	4,106	$	-	$	-	-	$	-	$	4,108
Stock plans	-		-		-		-		-	-		-		-
Net income	-		-		-		99		-	-		-		99
Other comprehensive
income, net of tax	-		-		-		-		41	-		-		41
Balance at June 30, 2021 (Successor)	244,401	$	2	$	4,106	$	99	$	41	-	$	-	$	4,248
Stock plans	6		-		8		-		-	-		-		8
Net income	-		-		-		126		-	-		-		126
Other comprehensive
income, net of tax	-		-		-		-		3	-		-		3
Balance at September 30, 2021	244,407	$	2	$	4,114	$	225	$	44	-	$	-	$	4,385

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUN

FRONTIER COMMUNICATIONSICATIONS PARENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in millions)

Successor
Predecessor
For the
For the
For the
five months
four months
nine months
ended September 30,
ended April 30,
ended September 30,
2021
2021
2020
Cash flows provided from (used by) operating activities:
Net income (loss)
$
225
$
4,541
$
(352)
Adjustments to reconcile net income (loss) to net cash
provided from (used by) operating activities:
Depreciation and amortization
452
506
1,204
Pension settlement costs
-
-
159
Stock-based compensation expense
8
(1)
3
Amortization of deferred financing costs
-
-
13
Non-cash reorganization items, net
-
(5,467)
85
Other adjustments
(11)
1
3
Deferred income taxes
68
(148)
(100)
Loss on disposal of Northwest Operations
-
-
160
Change in accounts receivable
65
36
63
Change in accounts payable and other liabilities
149
(168)
334
Change in prepaid expenses, income taxes and other assets
27
46
(80)
Net cash provided from (used by) operating activities
983
(654)
1,492
Cash flows provided from (used by) investing activities:
Capital expenditures
(646)
(500)
(825)
Proceeds from sale of Northwest Operations
-
-
1,131
Proceeds on sale of assets
-
9
7
Other
1
1
2
Net cash provided from (used by) investing activities
(645)
(490)
315
Cash flows provided from (used by) financing activities:
Long-term debt principal payments
(8)
(1)
(5)
Proceeds from long-term debt borrowings
-
225
-
Repayment of revolving debt
-
-
(749)
Financing costs paid
-
(4)
(19)
Finance lease obligation payments
(9)
(7)
(18)
Other
-
(16)
-
Net cash provided from (used by) financing activities
(17)
197
(791)
Increase (Decrease) in cash, cash equivalents, and restricted cash
321
(947)
1,016
Cash, cash equivalents, and restricted cash
at the beginning of the period
940
1,887
809
Cash, cash equivalents, and restricted cash at the end of the period
$
1,261
$
940
$
1,825
Supplemental cash flow information:
Cash paid during the period for:
Interest
$
121
$
84
$
548
Income tax payments, net
$
27
$
9
$
6
Reorganization items, net
$
-
$
1,397
$
134


	Successor				Predecessor
	For the nine months ended September 30,		For the five months ended September 30,		For the four months ended April 30,
	2022		2021		2021

Cash flows provided from (used by) operating activities:
Net Income	$	286	$	225	$	4,541
Adjustments to reconcile net income to net cash provided from (used by) operating activities:
Depreciation and amortization		870		452		506
Pension settlement costs		50		-		-
Stock-based compensation expense		54		8		(1)
Non-cash reorganization items, net		-		-		(5,467)
Lease Impairment		44		-		-
Bad debt expense		19		16		-
Other adjustments		(20)		(11)		1
Deferred income taxes		167		68		(148)
Change in accounts receivable		16		49		36
Change in pension and other post retirement liabilities		(527)		60		(12)
Change in accounts payable and other liabilities		94		89		(156)
Change in prepaid expenses, income taxes, and other assets		(12)		27		46
Net cash provided from (used by) operating activities		1,041		983		(654)

Cash flows provided from (used by) investing activities:
Capital expenditures		(1,860)		(646)		(500)
Proceeds on sale of assets		4		-		9
Purchase of short-term investments		(3,225)		-		-
Sale of short-term investments		900		-		-
Other		3		1		1
Net cash used by investing activities		(4,178)		(645)		(490)

Cash flows provided from (used by) financing activities:
Long-term debt principal payments		(11)		(8)		(1)
Proceeds from long-term debt borrowings		1,200		-		225
Financing costs paid		(17)		-		(4)
Finance lease obligation payments		(15)		(9)		(7)
Proceeds from financing lease transactions		70		-		-
Taxes paid on behalf of employees for shares withheld		(7)		-		-
Other		(1)		-		(16)
Net cash provided from (used by) financing activities		1,219		(17)		197

Increase (decrease) in cash, cash equivalents, and restricted cash		(1,918)		321		(947)
Cash, cash equivalents, and restricted cash at January 1,		2,178		940		1,887
Cash, cash equivalents, and restricted cash at September 30,	$	260	$	1,261	$	940

Supplemental cash flow information:
Cash paid during the period for:
Interest	$	286	$	121	$	84
Income tax payments, net	$	7	$	27	$	9
Reorganization items, net	$	-	$	-	$	1,397

The accompanying Notes are an integral part of these unaudited Consolidated Financial Statements.

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

(1) Summary of Significant ~~Accounting~~Accounting Policies:

a) Basis of Presentation and Use of Estimates:

Frontier Communications Parent, Inc. and its subsidiaries are referred to as “we,” “us,” “our,” “Frontier,” or the “Company” in this report. Our interim unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. All significant intercompany balances and transactions have been eliminated in consolidation. These interim unaudited consolidated financial statements include all adjustments (consisting of normal recurring accruals) considered necessary, in the opinion of Frontier’s management, to present fairly the results for the interim periods shown. Revenues, net income, ~~(loss)~~ and cash flows for any interim periods are not necessarily indicative of results that may be expected for the full year.

We operate in 1one reportable segment. Frontier provides both regulated and unregulated voice, data and video services to consumer, business, and wholesale customers and is typically the incumbent voice services provider in its service areas.

In 2021, we recategorized our previous operating expenses categories (“Network access expenses” and “Network related expense”) into one expense line: “Cost of service”. All historical periods presented have been updated to conform to the new categorization. In addition, certain reclassifications of prior period balances have been made to conform to the current period presentation. For our interim financial statements as of and for the period ended September 30, ~~2021,~~2022, we evaluated subsequent events and transactions for potential recognition or disclosure through the date that we filed this Form 10-Q with the Securities and Exchange Commission ~~(SEC)~~(“SEC”).

The preparation of our interim financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities at the date of the financial statements, (ii) the disclosure of contingent assets and liabilities, and (iii) the reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates. Estimates and judgments are used when accounting for the application of fresh start accounting, allowance for credit losses, asset impairments, indefinite-lived intangibles, depreciation and amortization, income taxes, and pension and other postretirement benefits, among others. ~~For information about our use of estimates as a result of fresh start accounting, see Note 4.~~

Chapter 11 Bankruptcy Emergence

OnAs described in Note 3 Emergence from the Chapter 11 Cases, and Note 4 Fresh Start Accounting, to our consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2021, the Company emerged from bankruptcy on April 30, 2021 (the “Effective Date”). Accordingly, the consolidated financial information has been prepared in conformity with Accounting Standards Codification Subtopic 852-10 (ASC 852), Reorganizations, for the Successor as a new entity with assets, liabilities, and a capital structure having carrying amounts not comparable with prior periods.

‎

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

Reorganization items incurred in the first four months of 2021 as a result of the Chapter 11 Cases included a gain on settlement of liabilities subject to compromise of $5,274 million, fresh start valuation adjustment charges of $1,038 million, debtor-in-possession financing costs of $15 million and $50 million in professional fees and other bankruptcy related costs presented separately in the accompanying consolidated statements of income.

The Company incurred significant costs associated with the reorganization, primarily legal and professional fees. Subsequent to April 14, 2020 (the “Petition Date”), ~~Frontier Communications Corporation, a Delaware corporation (“Old Frontier”),~~these costs were expensed as incurred and ~~its subsidiaries (collectively with Old Frontier,~~significantly affected our consolidated results of operations. From the ~~“Debtors”), commenced cases under chapter 11 (the “Chapter 11 Cases”)~~Petition Date to the Effective Date, these costs were included in “Reorganization items, net” on our consolidated statement of ~~title 11~~income. For the periods prior to the Petition Date and following the Effective Date, these costs have been included in “Restructuring costs and other charges” on our consolidated statement of the United States Code (the “Bankruptcy Code”) in the U.S. Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”). On August 27, 2020, the Bankruptcy Court confirmed the Fifth Amended Joint Plan of Reorganization of Frontier Communications Corporation and its Debtor Affiliates Pursuantincome. Refer to Chapter 11 of the Bankruptcy Code (the “Plan” or the “Plan of Reorganization”), which was filed with the Bankruptcy Court on August 21, 2020, and on April 30, 2021 (the “Effective Date”), the Debtors satisfied the conditions precedent to consummation of the Plan as set forth in the Plan, and the Debtors emerged from the Chapter 11 Cases without any need for further action or order of the Bankruptcy Court. See Note ~~3 for additional information related to our emergence from Chapter 11 Cases.~~9.

Fresh Start Accounting

Upon emergence from bankruptcy, we adopted fresh start accounting in accordance with Accounting Standards Codification (ASC) Topic 852 – Reorganizations (ASC 852) and became a new entity for financial reporting purposes. As a result, the consolidated financial statements for periods after the Effective Date are not comparable with the consolidated financial statements on or before that date as indicated by the “black line” division in the financial statements and footnote tables, which emphasizes the lack of comparability between amounts presented. References to “Successor” relate to our financial position and results of operations after the Effective Date. References to “Predecessor” refer to the financial position and results

~~PART I. FINANCIAL INFORMATION (Continued)~~

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

~~(Unaudited)~~

of operations of ~~Old~~ Frontier Communications Corporation and its subsidiaries on or before the Effective ~~Date. See Note 4 for additional information related to fresh start accounting.~~

During the Predecessor period, ASC 852 was applied in preparing the consolidated financial statements. ASC 852 requires the financial statements, for periods subsequent to the commencement of the Chapter 11 Cases, to distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. ASC 852 requires certain additional reporting for financial statements prepared between the bankruptcy filing date and the date of emergence from bankruptcy, including: (i) Reclassification of pre-petition liabilities that are unsecured, under-secured or where it cannot be determined that the liabilities are fully secured, to a separate line item on the consolidated balance sheet called, "Liabilities subject to compromise"; and (ii) Segregation of “Reorganization items, net” as a separate line on the consolidated statements of comprehensive loss, included within income from continuing operations.

Upon application of fresh start accounting, we allocated the reorganization value to our individual assets and liabilities, except for deferred income taxes, based on their estimated fair values in conformity with ASC Topic 805, Business Combinations. The amount of deferred taxes was determined in accordance with ASC Topic 740, Income Taxes. The Effective Date ~~fair values of our assets and liabilities differed materially from their recorded values as reflected on the historical balance sheets, see Note 4.~~(“Old Frontier”).

b)Changes in Accounting Policies:

The accounting policy differences between Predecessor and Successor include:

Universal Service Fund and Other Surcharges - Frontier collects various taxes, Universal Service Fund ~~(USF)~~(“USF”) surcharges ~~(primarily~~(“primarily federal ~~USF)~~USF”), and certain other ~~taxes,~~surcharges, from its customers and subsequently remits them to governmental authorities. The Predecessor recorded USF and other taxes on a gross basis on the consolidated statement of ~~operations,~~income, included within “Revenue” and ~~“Network access~~“Cost of service expense”. After emergence, the Successor records these USF and other taxes on a net basis.

Provision for Bad Debt –- The Predecessor reported the provision for bad debt as a reduction of revenue. After emergence, the Successor reports bad debt expense as an operating expense included in “Selling, general, and administrative expenses”.

Contract Acquisition Costs - During the Predecessor period, certain commissions to obtain new customers were deferred and amortized over four years, which represented the estimated customer contract period. As a result of fresh start accounting, that assumption was reevaluated and the period of benefit for our retail customers was determined to be less than one year. As such, these costs are now expensed as incurred.

Actuarial Losses on Defined Benefit Plans - Historically, actuarial gains (losses) were recognized as they occurred and included in “Accumulated other comprehensive income (loss)”, and were subject to amortization over the estimated average remaining service period of participants. As part of fresh start accounting, Frontier has made an accounting policy election to recognize these gains and losses immediately in the period they occur as ~~Investment~~“Investment and other income (loss)” on the consolidated statement of ~~operations.~~income.

~~Government Grants Revenue -~~ Certain governmental grants that were historically presented on a net basis as part of capital expenditures, are now presented on a gross basis and included in ”Revenue” on the consolidated statement of operations.

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

Government Grants Revenue - Certain governmental grants that were historically presented on a net basis as part of capital expenditures, are now presented on a gross basis and included in ”Revenue” on the consolidated statement of income.

Administrative Expenses –- Historically, the Predecessor capitalized certain administrative expenses, that following emergence, are expensed during the period incurred and included in “Selling, general, and administrative expense” on the consolidated statement of ~~operations.~~income.

c)~~Going Concern:~~

In accordance with the requirements of Accounting Standards Update (“ASU”) 2014-15, “Presentation of Financial Statements Going Concern (ASU 2014-15)”, and ASC 205, “Presentation of Financial Statements”, the Company has the responsibility to evaluate at each reporting period, including interim periods, whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations. In its evaluation for this report, management considered the Company’s current financial condition and liquidity sources, including current funds available, forecasted future cash flows and the Company’s conditional and unconditional obligations due within one year following the date of issuance of this Quarterly Report on Form 10-Q.

~~During the pendency of the Chapter 11 Cases, the~~ ~~Predecessor’s~~ ~~ability to continue as a going concern was contingent upon a variety of factors, including the Bankruptcy Court’s approval of the Plan and the~~ ~~Predecessor’s~~ ability to successfully implement the Plan. As a result of the effectiveness of the Plan, the Company believes it has the ability to meet its obligations for at least one year from the date of issuance of this Form 10-Q. Accordingly, the accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern and contemplate the realization of assets and the satisfaction of liabilities in the normal course business.

d) ~~Impact of COVID-19:~~

The 2019 novel coronavirus (“COVID-19”) and measures taken to prevent its spread across the globe have impacted our business in several ways. While overall the operational and financial impacts to Frontier of the COVID-19 pandemic as of September 30, 2021 were not significant, we continue to closely monitor the evolution of the pandemic, including new COVID-19 variants, as well as the ongoing impact to our employees, our customers, our suppliers and our results of operations.

In an effort to reduce the economic impacts of COVID-19, the United States federal government has responded with multiple stimulus bills. In addition, some of the states we operate in have issued executive orders as a result of COVID-19 that further impact our business. State and federal governments and health authorities, may continue to recommend or mandate measures that could impact our operations.

Frontier’s response to COVID-19 has included comprehensive operational safety precautions for our employees and customers. To date, we have not experienced significant disruptions in our workforce due to COVID-19 related absences or legislative or regulatory changes. As a federal contractor of the U.S. government, we are required to comply with the recent executive order mandating employees be fully vaccinated by the required dates. We have implemented a program for our non-union employees to facilitate compliance with these requirements.

Through September 30, 2021, we have not experienced any material disruptions in our supply chain. However, the challenges and continuing uncertainty of the COVID-19 pandemic could result in further impacts to our business and operations, such as disruptions in our supply chain, inflation in pricing for key materials or labor, or other adverse changes. We continue to closely track our customers’ payment activity as well as external factors which could materially impact payment trends. With more people working from home, we have experienced higher demands on our network and higher sales activity for our consumer broadband service offering. This sustained increase in network demand could lead to reduced network availability and potential outages, which may impair our ability to meet customer service level commitments, lead to higher costs, higher customer churn and potential increased regulatory actions. These potential changes, among others, could have a material financial impact to Frontier.

~~PART I. FINANCIAL INFORMATION (Continued)~~

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

~~(Unaudited)~~

e) Revenue Recognition:

Revenue for data & Internet services, voice services, video services, and switched and non-switched access services is recognized as services are provided to customers. Services that are billed in advance include monthly recurring network access services (including data services), special access services, and monthly recurring voice, video, and related charges. Revenue is recognized by measuring progress toward the complete satisfaction of the Company’sFrontier’s performance obligations. The unearned portion of these fees is deferred as a component of “Advanced billings” on our consolidated balance sheet and recognized as revenue over the period that the services are provided. Services that are billed in arrears include non-recurring network access services (including data services), switched access services, and non-recurring voice and video services. The earned but unbilled portion of these fees is recognized as revenue in our consolidated statements of operationsincome and accrued in “Accounts receivable” on our consolidated balance sheet in the period that services are provided. Excise taxes are recognized as a liability when billed.

Satisfaction of Performance Obligations

Frontier satisfies its obligations to customers by transferring goods and services in exchange for consideration received from the customer. The timing of Frontier’s satisfaction of the performance obligation may differ from the timing of the customer’s payment.

Bundled Service and Allocation of Discounts

When customers purchase more than one service, revenue for each service is determined by allocating the total transaction price based upon the relative stand-alone selling price of ~~each~~such service. We frequently offer service discounts as an incentive to customers, which reduce the total transaction price. Any incentives which are considered cash equivalents (e.g. gift cards) that are granted will similarly result in a reduction of the total transaction price. Cash equivalent incentives are accounted for on a portfolio basis and are recognized in the month they are awarded to customers.

Customer Incentives

In the process of acquiring and/or retaining customers, we may issue a variety of incentives aside from service discounts or cash equivalent incentives. Those incentives that have stand-alone value (e.g., gift cards not considered cash equivalents or free goods/services) are considered separate performance obligations. While these incentives are free to the customer, a portion of the consideration received from the customer is ascribed to them based upon their relative stand-alone selling price. These types of incentives are accounted for on a portfolio basis with both revenue and expense recognized in the month they are awarded to the customer. The earned revenue associated with these incentives is reflected in “Other” revenue while the associated costs are reflected in ~~“Network access expenses”~~“Cost of services”.

Upfront Fees

All non-refundable upfront fees assessed to our customers provide them with a material right to renew; therefore, they are deferred by creating a contract liability and amortized into “Data and Internet service” for fees charged to our wholesale customers and “Other revenue” for fees charged to all other customers, using a portfolio approach over the average customer ~~life using a portfolio approach.~~life.

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

Customer Acquisition Costs

Sales commission expenses are recognized as incurred. According to ASC 606, incremental costs in obtaining a contract with a customer are deferred and recorded as a contract asset if the period of benefit is expected to be greater than one year. For our retail customers, this period of benefit has been determined to be less than one year. As such, the Company applies the practical expedient that allows such costs to be expensed as incurred.

Taxes, Surcharges and Subsidies

Frontier collects various taxes, Universal Service Fund (“USF”) surcharges (primarily federal USF), and certain other surcharges, from its customers and subsequently remits these taxes to governmental authorities. During the predecessor period, USF and other surcharges amounted to $83 million for the four months ended April 30, 2021.

In June 2015, Frontier accepted the FCC offer of support to price cap carriers under the Connect America Fund (“CAF”) Phase II program, which was intended to provide long-term support for broadband build commitments in high cost unserved or underserved areas. We recognized FCC’s CAF Phase II subsidies into revenue on a straight-line basis over the seven-year funding term which ended on December 31, 2021. We have accrued an amount for any potential shortfall in the household build commitment that we deem to be probable and reasonably estimated, and we do not expect that any potential penalties, if ultimately incurred, will be material.

In May 2022, Frontier accepted the FCC offer under the Rural Digital Opportunity Fund (“RDOF”) Phase I program, which provides funding over a ten-year period to support the construction of broadband networks in rural communities across the country. Frontier accepted $37 million in annual support through 2032 in return for our commitment to make broadband available to households within the RDOF eligible areas. We will recognize the FCC’s RDOF Phase I subsidies into revenue on a straight-line basis over the ten-year funding term which will end March 31, 2032. We are required to complete the RDOF deployment by December 31, 2028. Thereafter, the FCC will review carriers’ RDOF program completion data, and if the FCC determines that the Company did not satisfy applicable FCC RDOF requirements, Frontier could be required to return a portion of the funds previously received and may be subject to certain other requirements and obligations. We will accrue an amount for any potential shortfall in the household build commitment that we deem to be probable and reasonably estimated.

d)Cash Equivalents:

We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. We had restricted cash of $30 million included in “Other assets” on our consolidated balance sheet as of September 30, 2022, and restricted cash of $17 million included in “Other current assets” and $34 million included in “Other assets” as of December 31, 2021.

e) Short-Term Investments:

Given the long-term nature of our fiber build, we have invested cash into short-term investments to improve interest income while preserving funding flexibility.

As of September 30, 2022, short-term investments of $2,325 million are comprised of term deposits earning interest in excess of traditional bank deposit rates, maturing between October 26, 2022, and March 14, 2023, and placed with banks with A-1/P-1 or equivalent credit quality. These short-term investments are in scope of ASC 320, Investments - Debt Securities. The short-term investments’ original maturity is greater than 90 days but less than one year, and they are classified as held to maturity, recorded as current assets, and are accounted for at amortized cost.

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

~~Taxes, Surcharges and Subsidies~~

Frontier collects various taxes, Universal Service Fund (USF) surcharges (primarily federal USF), and certain other surcharges, from its customers and subsequently remits these taxes to governmental authorities. During the predecessor period, USF and other surcharges amounted to $83 million for the four months ended April 30, 2021, and $58 million and $165 million for the three and nine months ended September 30, 2020.

In June 2015, Frontier accepted the FCC offer of support to price cap carriers under the Connect America Fund (CAF) Phase II program, which is intended to provide long-term support for broadband in high cost unserved or underserved areas. We recognize FCC’s CAF Phase II subsidies into revenue on a straight-line basis over the seven-year funding term.

f)~~Cash Equivalents~~:

We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. Restricted cash of $17 million is included in “Other current assets” as of September 30, 2021 and $33 million and $58 million are included in “Other assets” on our consolidated balance sheet as of September 30, 2021 and December 31, 2020, respectively.

g)Definite and Indefinite Lived Intangible Assets:

Intangible assets are initially recorded at estimated fair value. Old Frontier historically amortized its acquired customer lists and certain other finite-lived intangible assets over their estimated useful lives on an accelerated basis. Upon emergence from bankruptcy, customer relationship intangibles were established for business and wholesale customers. These intangibles are amortized on a straight-line basis over their assigned useful ~~life~~lives of between 11 and 16 years. Additionally, trademark and tradename assets established upon emergence are amortized on a straight-line basis over 5 years. We review such intangible assets annually, or more often if indicators of impairment arise, to ~~assess~~determine whether ~~any potential~~there is evidence that indicates an impairment ~~exists and whether factors~~condition may exist that would necessitate a change in useful life and a different amortization period.

h)g)Lease Accounting:

We determine if an arrangement contains a lease at inception. Right-of-use (ROU) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating and Finance lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating and finance lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms used in accounting for leases may reflect options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for operating leases is recognized on a straight-line basis over the lease term. ROU assets for operating leases are recorded to “Other Assets”, and the related liabilities recorded to “Other current liabilities”, and “Other liabilities” on our consolidated balance sheets. Assets subject to finance leases are included in “Property, Plant & Equipment”, with corresponding liabilities recorded to “Other current liabilities”, and “Other liabilities” on our consolidated balance sheets. ~~Upon emergence from bankruptcy, lease asset and liability balances were adjusted to fair value.~~

We assess potential impairments to our leases annually, or as indicators exist, if indicators of impairment arise to determine whether there is evidence that indicate an impairment condition may exist. We continue to review our real estate portfolio and, during the first quarter of 2022, determined to either terminate or market for sublease certain facilities leases, which triggered an impairment of $44 million for our finance and operating lease assets recorded as restructuring charges and other costs. See Note 9 for further details.

~~PART I. FINANCIAL INFORMATION (Continued)~~

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

~~(Unaudited)~~

(2) Recent Accounting ~~Literature~~Literature::

~~Recently Adopted Accounting Pronouncements~~

~~Financial Instrument Credit Losses~~

In June 2016, The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, “Financial Instruments – Credit Losses” (CECL or ASU 2016-13). This standard, along with its amendments, update the current financial statement impairment model requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. For the Company, ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. Upon emergence from the Chapter 11 Cases, effective as of April 30, 2021, Frontier adopted the standard as part of its fresh start accounting policy changes. The adoption of CECL did not result in a material impact to our financial position or results of operations.

Recent Accounting Pronouncements Not Yet Adopted

Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting". This standardprovides optional expedients, and allows for certain exceptions to existing GAAP, for contract modifications triggered by the expected market transition of certain benchmark interest rates to alternative reference rates. The standard applies to contracts and other arrangements that reference the London Interbank Offering Rate (LIBOR) or any other rates ending after December 31, 2022. ~~Frontier is evaluating the impact of the~~The adoption of this standard ~~including optional expedients, on~~does not result in a material impact to our ~~consolidated~~ financial ~~statements.~~position or results of operations.

Government Assistance

(3) ~~Emergence from~~In November 2021, the ~~Chapter 11 Cases~~:

~~On April 14, 2020,~~FASB issued ASU 2021-10, which requires business entities to disclose information about certain government assistance they receive. Such disclosure requirements include the Debtors commenced the Chapter 11 Cases in Bankruptcy Court. The Chapter 11 Cases were jointly administered under the caption In re Frontier Communications Corporation., et al., Case No. 20-22476 (RDD).

On May 15, 2020, the Debtors filed a proposed Joint Plan of Reorganization and related Disclosure Statement, each of which were amended on June 26, 2020, June 29, 2020 and June 30, 2020. On May 15, 2020, the Debtors also filed a proposed order approving the Disclosure Statement and various plan solicitation materials, including the solicitation and voting procedures, which were revised on June 29, 2020 (including modifications to somenature of the ~~exhibits). On June 30, 2020, the Bankruptcy Court entered the modified order approving the adequacy of the Disclosure Statement~~transactions and the ~~solicitation~~related accounting policy used, the line items on the balance sheet and ~~notice procedures~~income statement that are affected and the ~~forms of voting ballots~~amounts applicable to each financial statement line item and notices in connection therewith. The order established June 29, 2020 as the voting record date, July 2, 2020 as the solicitation launch date and July 31, 2020 as the voting deadline. On August 21, 2020, the Debtors filed the Plan with the Bankruptcy Court. On August 27, 2020, the Bankruptcy Court entered the Order Confirming the Plan (the “Confirmation Order”).

~~On the Effective Date, the Debtors satisfied all conditions precedent required for consummation of the Plan as set forth in the Plan, the Plan became effective in accordance with its~~significant terms and ~~the Debtors emerged from the Chapter 11 Cases without any need for further action or order of the Bankruptcy Court.~~

On the Effective Date, pursuant to the terms of the Plan, all of the obligations under Old Frontier’s unsecured senior note indentures were cancelled, and in connection with emergence, Frontier issued 244,401,000 shares of common stock that were transferred to holders of the allowed senior notes claims (as defined by the Plan) and the Restructuring Support Agreement was automatically terminated.

1312

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

~~Reorganization items incurred as a result~~conditions of the ~~Chapter 11 Cases presented separately in~~transactions. ASU 2021-10 will be effective for annual periods beginning after December 15, 2021 (year ending December 31, 2022 for the ~~accompanying consolidated statements of operations were as follows:~~

Predecessor
For the four months
For the nine months
ended April 30,
ended September 30,
($ in millions)
2021
2020
Gain on settlement of liabilities subject to compromise
$
5,274
$
-
Fresh start valuation adjustments
(1,038)
-
Write-off of debt issuance costs and
original issue net discount on debt subject to compromise
-
(85)
Debtor-in-possession financing costs
(15)
(19)
Professional fees and other bankruptcy related costs
(50)
(169)
Reorganization items, net
$
4,171
$
(273)

Company). The Company ~~incurred significant costs associated with~~is currently evaluating the reorganization, primarily legal and professional fees. Subsequent to the Petition Date, these costs were expensed as incurred and significantly affected our consolidated results of operations. From the Petition Date to the Effective date, these costs were included in Reorganization items, net on our consolidated statement of operations. For the periods prior to the Petition date and following the Effective Date, these costs were included in Restructuring costs and other charges on our consolidated statement of operations. Refer to Note 12.

~~(4)~~ ~~Fresh Start Accounting~~:

In connection with our emergence from bankruptcy and in accordance with ASC Topic 852, we qualified for and adopted fresh start accounting on the Effective Date. We were required to adopt fresh start accounting because (i) the holders of existing voting shares of the Predecessor received less than 50% of the voting shares of the Successor, and (ii) the reorganization value of our assets immediately prior to confirmation of the Plan was less than the post-petition liabilities and allowed claims.

The adoption of fresh start accounting resulted in a new reporting entity for financial reporting purposes with no beginning retained earnings or deficit. The cancellation of all outstanding shares of Old Frontier common stock on the Effective Date and issuance of new shares of common stock of the Successor caused a related change of control of the Company under ASC 852.

Upon the application of fresh start accounting, Frontier allocated the reorganization value to its individual assets based on their estimated fair values. Each asset and liability existing as of the Effective Date, other than deferred taxes, have been stated at the fair value, and determined at appropriate risk-adjusted interest rates. Deferred taxes were determined in conformity with applicable accounting standards.

Reorganization value represents the fair value of the Successor’s assets before considering liabilities. Our reorganization value is derived from an estimate of enterprise value. Enterprise value represents the estimated fair value of an entity’s long-term debt and shareholders’ equity. In support of the Plan, the enterprise value of the Successor was estimated to be approximately $12.5 billion. The valuation analysis was prepared using financial information and financial projections and applying standard valuation techniques, including a risked net asset value analysis.

The Effective Date estimated fair values of certain of the Company's assets and liabilities differed materially from their recorded values as reflected on the historical balance sheets. As a result of the application of fresh

~~PART I. FINANCIAL INFORMATION (Continued)~~

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

~~(Unaudited)~~

start accounting and the effects of the implementation of the Plan, the Company’s consolidated financial statements after April 30, 2021 are not comparable to the Company’s consolidated financial statements as of or prior to that date.

~~Reorganization Value~~

As set forth in the Plan of Reorganization, the enterprise value of the Successor Company was estimated to be between $10.5 billion and $12.5 billion. Based on the estimates and assumptions discussed below, the Company estimated the enterprise value to be $12.5 billion as of the Effective Date. The Company based their enterprise value on projections which included higher capital expenditures to enhance the network and would result in higher revenue and Earnings before interest, taxes, depreciation, and amortization (“EBITDA”).

Management, with the assistance of its valuation advisors, estimated the enterprise value (“EV”) of the Successor Company, which was approved by the Bankruptcy Court, using various valuation methodologies, including a Discounted Cash Flow analysis (DCF), the Guideline Public Company Method (GPCM), and the Guideline Transaction Method (GTM). Under the DCF analysis, the enterprise value was estimated by discounting the projections’ unlevered free cash flow by the Weighted Average Cost of Capital (WACC), the Company’s estimated rate of return. A terminal value was estimated by applying a Gordon Growth Model to the normalized level of cash flows in the terminal period. The Gordon Growth Model was based on the WACC and the perpetual growth rate, and the terminal value was added back to the discounted cash flows.

Under the GPCM, the Company’s enterprise value was estimated by performing an analysis of publicly traded companies that operate in a similar industry. A range of Enterprise Value / EBITDA (EV/EBITDA) multiples were selected based on the financial and operating attributes of Frontier relative to the comparable publicly traded companies. The selected range of multiples were applied to the Company’s forecasted EBITDA to estimate the enterprise value of the Company.

The GTM approach is similar to the GPCM, in that it relies on EV/EBITDA multiples but rather than of publicly traded companies, the multiples are based on precedent transactions. A range of multiples was derived by analyzing the operating and financial attributes of the acquired companies and the implied EV/EBITDA multiples. This range of multiples were then applied to the forecasted EBITDA of the Company to arrive an enterprise value.

~~The following table reconciles the enterprise value to the estimated fair value of the Successor common stock as of the Effective Date:~~



~~($ in millions and shares in thousands, except per share data)~~

~~Enterprise value~~	$	~~12,500~~
~~Plus: Cash and cash equivalents and restricted cash~~		~~940~~
~~Less: Fair value of debt and other liabilities~~		~~(7,267)~~
~~Less: Pension and other postretirement benefits~~		~~(1,774)~~
~~Less: Deferred tax liability~~		~~(291)~~
~~Fair value of Successor stockholders’ equity~~	$	~~4,108~~
~~Shares issued upon emergence~~		~~244,401~~
~~Per share value~~	$	17

~~PART I. FINANCIAL INFORMATION (Continued)~~

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

~~(Unaudited)~~

~~The reconciliation of the Company’s enterprise value to reorganization value as of the Effective Date is as follows:~~



~~($ in millions)~~

~~Enterprise value~~	$	~~12,500~~
~~Plus: Cash and cash equivalents and restricted cash~~		~~940~~
~~Plus: Current liabilities (excluding debt, finance leases, and non-operating liabilities)~~		~~1,179~~
~~Plus: Long term liabilities (excluding debt, finance leases, deferred tax liability)~~		~~307~~
~~Reorganization value~~	$	~~14,926~~

The adjustments set forth in the following unaudited Consolidated Balance Sheet reflect the consummation of the transactions contemplated by the Plan (reflected in the column “Reorganization Adjustments”) as well as fair value adjustments as a result ofimpact the adoption of ~~fresh start accounting (reflected in the column “Fresh Start Adjustments”).~~

~~PART I. FINANCIAL INFORMATION (Continued)~~

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

~~(Unaudited)~~

~~The following table reflects the preliminary reorganization and application of ASC 852~~ASU 2021-10 will have on ~~our consolidated balance sheet as of April 30, 2021:~~

(Unaudited)
(Unaudited)
($ in millions)
Predecessor
Reorganization
Fresh Start
Successor
April 30, 2021
Adjustments
Adjustments
April 30, 2021
ASSETS
Current assets:
Cash and cash equivalents
$
2,059
$
(1,169)
(1)
$
-
$
890
Accounts receivable, net
516
-
-
516
Contract acquisition costs
91
-
(91)
(8)
-
Prepaid expenses
92
-
-
92
Income taxes and other current assets
45
-
(3)
(8)
42
Total current assets
2,803
(1,169)
(94)
1,540
Property, plant and equipment, net
13,020
-
(4,473)
(9)
8,547
Other intangibles, net
578
-
3,863
(10)
4,441
Other assets
526
(8)
(1)
(120)
(8)(11)
398
Total assets
$
16,927
$
(1,177)
$
(824)
$
14,926
LIABILITIES AND EQUITY (DEFICIT)
Current liabilities:
Long-term debt due within one year
$
5,782
$
(5,767)
(3)
$
-
$
15
Accounts payable
518
(6)
(2)
-
512
Advanced billings
208
-
-
208
Accrued other taxes
185
-
-
185
Accrued interest
81
(1)
(2)
-
80
Pension and other postretirement benefits
48
-
-
48
Other current liabilities
309
53
(2)
(36)
(11)
326
Total current liabilities
7,131
(5,721)
(36)
1,374
Deferred income taxes
389
70
(14)
(168)
(14)
291
Pension and other postretirement benefits
2,163
-
(437)
(13)
1,726
Other liabilities
440
-
(28)
(11)
412
Long-term debt
-
6,738
(3)
277
(12)
7,015
Total liabilities not subject to compromise
10,123
1,087
(392)
10,818
Liabilities subject to compromise
11,570
(11,570)
(7)
-
-
Total liabilities
21,693
(10,483)
(392)
10,818
Equity (Deficit):
Shareholders' equity of Frontier:
Successor common stock
-
2
(5)
-
2
Predecessor common stock
27
(27)
(4)
-
-
Successor additional paid-in capital
-
4,106
(5)
-
4,106
Predecessor additional paid-in capital
4,818
(4,818)
(4)
-
-
Retained earnings (deficit)
(8,855)
10,028
(6)
(1,173)
(15)
-
Accumulated other comprehensive income (loss), net of tax
(741)
-
741
(16)
-
Treasury common stock
(15)
15
(4)
-
-
Total equity (deficit)
(4,766)
9,306
(432)
4,108
Total liabilities and equity (deficit)
$
16,927
$
(1,177)
$
(824)
$
14,926

‎its disclosures

~~PART I. FINANCIAL INFORMATION (Continued)~~

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

~~(Unaudited)~~

~~Reorganization Adjustments~~

~~In accordance with the Plan of Reorganization, the following adjustments were made:~~

~~(1) Reflects net cash payments as of the Effective Date from implementation of the Plan as follows:~~



~~($ in millions)~~

~~Sources:~~
~~Net proceeds from Incremental Exit Term Loan Facility~~	$	~~220~~
~~Release of restricted cash from other assets to cash~~		8
~~Total sources~~		~~228~~

~~Uses:~~
~~Payments of Excess to Unsecured senior notes holders~~		~~(1,313)~~
~~Payments of pre-petition accounts payable and contract cure payments~~		~~(62)~~
~~Payments of professional fees and other bankruptcy related costs~~		~~(22)~~
~~Total uses~~		~~(1,397)~~
~~Net uses of cash~~	$	~~(1,169)~~

~~(2) Reflects the reinstatement of accounts payable and accrued expenses upon emergence, as well as payments made on the Effective Date.~~

(3) Reflects the conversion of our DIP-to-Exit term loan facility, DIP-to-Exit First Lien Notes, and DIP-to-Exit Second Lien Notes. Also represent the reclassification of the debt from current liabilities during bankruptcy to non-current liabilities based on the maturity of the debt recorded by the Company.

~~(4) Reflects the cancellation of Predecessor common stock, additional paid in capital and treasury stock.~~

~~(5) Reflects the issuance of Successor common stock and additional paid in capital to the unsecured senior note holders.~~

~~(6) Reflects the cumulative impact of reorganization adjustments.~~



~~($ in millions)~~

~~Gain on settlement of Liabilities Subject to Compromise~~	$	~~5,274~~
~~Cancellation of Predecessor equity~~		~~4,754~~

~~Net impact on accumulated deficit~~	$	~~10,028~~

~~PART I. FINANCIAL INFORMATION (Continued)~~

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

~~(Unaudited)~~

(7) As part of the Plan of Reorganization, the Bankruptcy Court approved the settlement of claims reported within Liabilities subject to compromise in the Company’s Consolidated balance sheet at their respective allowed claim amounts.

~~The table below indicates the disposition of Liabilities subject to compromise:~~



~~($ in millions)~~

~~Liabilities subject to compromise pre-emergence~~	$	~~11,570~~

~~Reinstated on the Effective Date:~~
~~Accounts payable~~		~~(66)~~
~~Other current liabilities~~		~~(59)~~
~~Less: total liabilities reinstated~~		~~(125)~~

~~Amounts settled per the Plan of Reorganization~~
~~Issuance of take back debt~~		~~(750)~~
~~Payment for settlement of unsecured senior noteholders~~		~~(1,313)~~
~~Equity issued at emergence to unsecured senior noteholders~~		~~(4,108)~~
~~Total amounts settled~~		~~(6,171)~~

~~Gain on settlement of Liabilities Subject to Compromise~~	$	~~5,274~~

~~Fresh Start Adjustments~~

~~In accordance with the application of fresh start accounting, the following adjustments were made:~~

~~(8)~~Reflects unamortized deferred commissions paid to acquire new customers that are eliminated upon emergence as this is not a probable future benefit for the Successor. Costs to obtain customers have been reflected as part of intangible assets. Adjustment also reflects the elimination of certain contract assets and contract liabilities.

~~(9)Property Plant & Equipment – Reflects the decrease in net book value of property and equipment to the estimated fair value as of the Effective Date.~~

Personal property valued consisted of outside and inside plant network equipment, computers and software, vehicles, office furniture, fixtures and equipment, computers and software, and construction-in-progress. The fair value of our personal property was estimated using the cost approach, while the income approach was considered to assess economic sufficiency to support asset values. As a part of the valuation process, the third-party advisors’ diligence procedures included using internal data to identify and value assets.

Real property valued consisted of land, buildings, and leasehold improvements. The fair value was estimated using the cost approach and sales comparison (market) approach, with consideration of economic sufficiency to support certain asset values.

~~PART I. FINANCIAL INFORMATION (Continued)~~

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

~~(Unaudited)~~

~~The following table summarizes the components of property and equipment, net as of April 30, 2021, and the fair value as of the Effective Date:~~

Predecessor
Fair Value
Successor
($ in millions)
Historical Value
Adjustment
Fair Value
Land
$
209
$
40
$
249
Buildings and leasehold improvements
2,134
(958)
1,176
General support
1,635
(1,462)
173
Central office/electronic circuit equipment
8,333
(7,364)
969
Poles
1,359
(843)
516
Cable, fiber and wire
11,824
(8,755)
3,069
Conduit
1,611
(282)
1,329
Construction work in progress
1,048
18
1,066
Property, plant and equipment
$
28,153
$
(19,606)
$
8,547
Less: Accumulated depreciation
(15,133)
15,133
-
Property, plant and equipment, net
$
13,020
$
(4,473)
$
8,547

~~(10)Reflects the fair value adjustment to recognize trademark, trade name and customer relationship.~~

For purposes of estimating the fair values of customer relationships, the Company utilized an Income Approach, specifically, the Multi-Period Excess Earnings method, or MPEEM. The MPEEM estimates fair value based on the present value of the incremental after-tax cash flows attributable only to the subject intangible assets after deducting contributory asset charges. The cash flows attributable to the customer relationships were adjusted for contributory asset charges related to the working capital, fixed assets, trade name/trademarks and assembled workforce. The discount rate utilized to present-value the after-tax cash flows was based on the overall weighted cost of capital of the Company as well as the asset specific risks of the intangible assets.

For purposes of estimating the fair value of trademarks and tradenames, an Income approach was used, specifically, the Relief from Royalty Method. The estimated royalty rates were historical third-party transactions regarding the licensing of similar type of assets as well as a review of historical assumptions used in prior transactions. The selected royalty rates were applied to the revenue generated by the trademarks and tradenames to determine the amount of royalty payments saved as a result of owning these assets. The forecasted cash flows were based on the Company’s projected revenues and the resulting royalty savings were discounted using a rate based on the overall weighted cost of capital of the Company as well as the asset specific risks of the intangible assets.

~~(11)~~Reflects the fair value adjustment to the right of use assets and lease liabilities. Upon application of fresh start accounting, the Company revalued its right-of-use assets and lease liabilities using the incremental borrowing rate applicable to the Company after emergence from bankruptcy and commensurate with its new capital structure. In addition, the Company decreased the right-of-use assets to recognize $4 million related to the unfavorable lease contracts.

~~(12)Reflects the fair value adjustment to adjust Long-term debt as of the Effective Date. This adjustment is to state the Company's debt at estimated fair values.~~

~~(13)Reflects a remeasurement of pension and Other Postretirement Benefits related accounts as part of fresh start accounting considerations at emergence.~~

~~PART I. FINANCIAL INFORMATION (Continued)~~

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

~~(Unaudited)~~

~~(14)~~Reflects the impact of fresh start adjustments on deferred taxes. Frontier purchased the assets, including the stock of subsidiaries, of Frontier Communications Corporation (“Predecessor’s Parent”) at the time of emergence. The Predecessor’s Parent’s federal and state net operating loss carryforwards are expected to have been utilized as a result of the taxable gain realized upon emergence. To the extent not utilized to offset taxable gain, such net operating loss carryforwards are expected to be reduced in accordance with Section 108 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”). As part of the taxable purchase, elections were made under Code section 338(h)(10) to step up the value of assets in certain subsidiaries to fair market value. All other subsidiaries carried over their deferred taxes. The adjustments reflect a $1.5 billion reduction in deferred tax assets for federal and state net operating loss carryforwards, a reduction in valuation allowance and a reduction in deferred tax liabilities.

~~(15)Reflects the cumulative impact of the fresh start adjustments as discussed above and the elimination of Predecessor accumulated earnings.~~

~~(16)Reflects the derecognition of accumulated other comprehensive loss.~~

~~(5)~~(3) Revenue Recognition:

We categorize our products, services and other revenues into the following categories:

Data and Internet services include broadband services for consumer and business customers. We provide data transmission services to high volume business customers and other carriers with dedicated high capacity circuits (“nonswitched access”) including services to wireless providers (wireless backhaul);

Voice services include traditional local and long-distance wireline services, Voice over Internet Protocol (VoIP) services, as well as a number of unified messaging services offered to our consumer and business customers. Voice services also include the long-distance voice origination and termination services that we provide to our business customers and other carriers;

Video services include revenues generated from services provided directly to consumer customers as linear terrestrial television services, through DISH® satellite TV service, and through partnerships with over-the-top (OTT) video providers. Video services also includes pay per view revenues, video on demand, equipment rentals, and video advertising. The Company has made the strategic decision to limit sales of new traditional TV services, focusing on our broadband products and OTT video options;

Other customer revenue includes switched access revenue, ~~sales of customer premise equipment to our business customers,~~ rents collected for ~~collocation~~colocation services, and revenue from other services and fees. Switched access revenue includes revenues derived from allowing other carriers to use our network to originate and/or terminate their local and long-distance voice ~~traffic (switched access).~~traffic. These services are primarily billed on a minutes-of-use basis applying tariffed rates filed with the FCC or state agencies; and

Subsidy and other regulatory revenue ~~includes~~include revenues generated from cost subsidies from state and federal authorities, including ~~the Connect America Fund Phase II.~~CAF II and RDOF.

‎

2113

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

The following tables provide a summary of revenues, by ~~category. Prior year revenues in the following tables include revenues~~category:


	Successor
	For the three months ended September 30,		For the three months ended September 30,
($ in millions)	2022		2021

Data and Internet services	$	848	$	834
Voice services		369		411
Video services		127		149
Other		82		99
Revenue from contracts with customers ⁽¹⁾		1,426		1,493
Subsidy and other revenue ⁽²⁾		18		83
Total revenue	$	1,444	$	1,576

	Successor
	For the three months ended September 30,		For the three months ended September 30,
($ in millions)	2022		2021

Consumer	$	785	$	800
Business and wholesale		641		693
Revenue from contracts with customers ⁽¹⁾		1,426		1,493
Subsidy and other revenue ⁽²⁾		18		83
Total revenue	$	1,444	$	1,576


	Successor				Predecessor
	For the nine months ended September 30,		For the five months ended September 30,		For the four months ended April 30,
($ in millions)	2022		2021		2021

Data and Internet services	$	2,531	$	1,390	$	1,125
Voice services		1,136		694		647
Video services		398		254		223
Other		245		161		125
Revenue from contracts with customers ⁽¹⁾		4,310		2,499		2,120
Subsidy and other revenue ⁽²⁾		40		138		111
Total revenue	$	4,350	$	2,637	$	2,231

	Successor				Predecessor
	For the nine months ended September 30,		For the five months ended September 30,		For the four months ended April 30,
($ in millions)	2022		2021		2021

Consumer	$	2,352	$	1,343	$	1,133
Business and wholesale		1,958		1,156		987
Revenue from contracts with customers ⁽¹⁾		4,310		2,499		2,120
Subsidy and other revenue ⁽²⁾		40		138		111
Total revenue	$	4,350	$	2,637	$	2,231

⁽¹⁾Includes lease revenue of $15 million and $16 million for the ~~Northwest Operations~~three months ended September 30, 2022 and 2021, respectively; and $48 million for the nine months ended September 30, 2022. Lease revenue was $26 million for the five months ended September 30, 2021, and $26 million for the four months ended April 30, 2021.

⁽²⁾Subsidy and other revenue for the three and nine months ended September 30, ~~2020 (prior~~2022, does not include revenue from CAF II as the program ended in 2021. We began to ~~its disposal):~~receive funding for RDOF in the second quarter of 2022.

2214

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

Successor
Predecessor
For the five months
For the four months
For the nine months
ended September 30,
ended April 30,
ended September 30,
($ in millions)
2021
2021
2020
Consumer ⁽³⁾
$
1,343
$
1,133
$
2,746
Business and wholesale ⁽³⁾
1,156
987
2,429
Revenue from contracts with customers ⁽¹⁾
2,499
2,120
5,175
Subsidy and other revenue ⁽²⁾
138
111
285
Total revenue
$
2,637
$
2,231
$
5,460

⁽¹⁾Lease revenue included in Revenue from contracts with customers was $16 million for the three months ended September 30, 2021, $26 million for the five months ended September 30, 2021, $21 million for the four months ended April 30, 2021, and $16 million and $50 million for the three and nine months ended September 30, 2020, respectively.

⁽²⁾~~Includes $15 million and $25 million in transition services revenue in connection with the divestiture of the Northwest Operations for the three and nine months ended September 30, 2020, respectively.~~

⁽³⁾~~Due to changes in methodology during the second quarter of 2021, historical periods have been updated to reflect the comparable amounts.~~

The following is a summary of the changes in the contract assets and contract liabilities:

Contract Assets
Contract Liabilities
($ in millions)
Current
Noncurrent
Current
Noncurrent
Balance at December 31, 2020 (Predecessor)
$
6
$
9
$
58
$
20
Revenue recognized included
in opening contract balance
(4)
-
(23)
(3)
Cash received, excluding amounts
recognized as revenue
-
-
22
2
Balance at April 30, 2021 (Predecessor)
$
2
$
9
$
57
$
19
Fresh start accounting adjustments
(2)
(9)
(42)
(18)
Balance at April 30, 2021 (Predecessor)
$
-
$
-
$
15
$
1
Balance at April 30, 2021 (Successor)
$
-
$
-
$
15
$
1
Revenue recognized included
in opening contract balance
-
-
(13)
(1)
Credits granted, excluding amounts
recognized as revenue
-
-
17
9
Reclassified between current
and concurrent
-
-
1
(1)
Balance at September 30, 2021 (Successor)
$
-
$
-
$
20
$
8


	Contract Assets				Contract Liabilities
($ in millions)	Current		Noncurrent		Current		Noncurrent

Balance at December 31, 2021 (Successor)	$	-	$	-	$	27	$	11
Revenue recognized included
in opening contract balance		-		-		(21)		(8)
Credits granted, excluding amounts
recognized as revenue		-		-		17		17
Reclassified between current
and noncurrent		-		-		4		(4)
Balance at September 30, 2022 (Successor)	$	-	$	-	$	27	$	16


	Contract Assets				Contract Liabilities
($ in millions)	Current		Noncurrent		Current		Noncurrent

Balance at December 31, 2020 (Predecessor)	$	6	$	9	$	58	$	20
Revenue recognized included
in opening contract balance		(4)		-		(23)		(3)
Cash received, excluding amounts
recognized as revenue		-		-		22		2
Balance at April 30, 2021 (Predecessor)	$	2	$	9	$	57	$	19
Fresh start accounting adjustments		(2)		(9)		(42)		(18)
Balance at April 30, 2021 (Predecessor)	$	-	$	-	$	15	$	1


Balance at April 30, 2021 (Successor)	$	-	$	-	$	15	$	1
Revenue recognized included
in opening contract balance		-		-		(13)		(1)
Cash received, excluding amounts
recognized as revenue		-		-		17		9
Reclassified between current
and noncurrent		-		-		1		(1)
Balance at September 30, 2021 (Successor)	$	-	$	-	$	20	$	8

~~PART I. FINANCIAL INFORMATION (Continued)~~

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

~~(Unaudited)~~

Contract Assets
Contract Liabilities
($ in millions)
Current
Noncurrent
Current
Noncurrent
Balance at December 31, 2019 (Predecessor)
$
37
$
8
$
41
$
21
Revenue recognized included
in opening contract balance
(27)
-
(47)
(10)
Cash received, excluding amounts
recognized as revenue
-
-
64
9
Credits granted, excluding amounts
recognized as revenue
3
-
-
-
Reclassified between current
and concurrent
-
-
1
(1)
Balance at September 30, 2020 (Predecessor)
$
13
$
8
$
59
$
19

The unsatisfied obligations for retail customers consist of amounts in advance billings, which are expected to be earned within the following monthly billing cycle. Unsatisfied obligations for wholesale customers are based on a point-in-time calculation and determined by the number of circuits provided and the contractual price. These wholesale customer obligations change from period to period based on new circuits added as well as circuits that are terminated.

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period:
‎

Successor
($ in millions)
Revenue from contracts with customers
2021 (remaining three months)
$
385
2022
512
2023
323
2024
152
2025
81
Thereafter
121
Total
$
1,574

(6) ~~Accounts Receivable~~:

~~The components of accounts receivable, net are as follows~~:

Successor
Predecessor
($ in millions)
September 30, 2021
December 31, 2020

Retail and wholesale
$
424
$
608
Other
77
75
Less: Allowance for credit losses
(49)
(130)
Accounts receivable, net
$
452
$
553

2415

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

AsThe following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied at the end of ~~April 30, 2021,~~ the ~~fair value~~reporting period:


($ in millions)	Revenue from contracts with customers
2022 (remaining three months)	$	320
2023		410
2024		273
2025		137
2026		80
Thereafter		87
Total	$	1,307

(4) Accounts Receivable:

The components of ~~our net~~ accounts receivable, balances approximated their carrying values; therefore, no fair value adjustment for fresh start accounting was required. In estimating the fair values of receivables from certain of our wholesale customers, we evaluated ongoing billing disputes and the current status of settlement discussions. The final settlements with these customers may differ significantly from our estimates. See Note 5 for additional detail.net are as follows:



($ in millions)	September 30, 2022		December 31, 2021
Retail and wholesale	$	403	$	441
Other		66		74
Less: Allowance for doubtful accounts		(47)		(57)
Accounts receivable, net	$	422	$	458

We maintain an allowance for credit losses based on the estimated ability to collect accounts receivable. The allowance for credit losses is increased by recording an expense for the provision for bad debts for retail customers, and through decreases to revenue at the time of billing for wholesale customers. The allowance is decreased when customer accounts are written off, or when customers are given credits.

The provision for bad debts was $5 million and $10 million for the three months ended September 30, 2022 and 2021, respectively; and $19 million for the nine months ended September 30, 2022. The provision for bad debts was $16 million for the five months ended September 30, 2021, and $14 million for the four months ended April 30, ~~2021, and $10 million and $16 million for the three and five months ended September 30, 2021, respectively.~~2021.

In accordance with ASC 326, Frontier performs its calculation to estimate expected credit losses, utilizing rates that are consistent with the Company’s write offs (net of recoveries) because such events affect the entity’s loss given default experience.

Activity in the allowance for credit losses for the ~~five~~nine months ended September 30, ~~2021~~2022 was as follows:





($ in millions)			~~Successor~~

Balance at ~~April 30,~~December 31, 2021		$	-57
Provision for bad debt			~~(16)~~19
Amounts charged to revenue			~~(30)~~26
Write offs charged against the allowance			1
~~Other~~			~~(4)~~(55)
Balance at September 30, ~~2021~~	2022	$	~~(49)~~47

~~(7)~~ ~~Property, Plant and Equipment~~:

~~Property, plant and equipment, net is as follows~~
‎:

Successor
Predecessor
($ in millions)
September 30, 2021
December 31, 2020

Property, plant and equipment
$
9,232
$
27,695
Less: Accumulated depreciation
(314)
(14,764)
Property, plant and equipment, net
$
8,918
$
12,931

2516

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

~~As of April 30, 2021, as a result of fresh start accounting, we have adjusted our property,~~(5) Property, Plant and Equipment:

Property, plant and equipment, ~~balance to fair value. See Note 4 for additional information.~~net is as follows:



($ in millions)	September 30, 2022		December 31, 2021
Property, plant and equipment	$	11,948	$	9,707
Less: Accumulated depreciation		(1,101)		(508)
Property, plant and equipment, net	$	10,847	$	9,199

Depreciation expense is principally based on the composite group method. Depreciation expense was as follows:

Successor
Predecessor
For the three months
For the three months
ended September 30,
ended September 30,
($ in millions)
2021
2020
Depreciation expense
$
191
$
311
Successor
Predecessor
For the five months
For the four months
For the nine months
ended September 30,
ended April 30,
ended September 30,
($ in millions)
2021
2021
2020
Depreciation expense
$
318
$
407
$
941


	For the three months ended September 30,		For the three months ended September 30,
($ in millions)	2022		2021

Depreciation expense	$	215	$	191

	Successor				Predecessor
	For the nine months ended September 30,		For the five months ended September 30,		For the four months ended April 30,
($ in millions)	2022		2021		2021

Depreciation expense	$	629	$	318	$	407

As a result of applying fresh start accounting on the Effective Date, Frontier’s fixed assets were reduced from $13.0 billion to $8.5 billion. For the nine months ended September 30, 2022, the decrease in depreciation expense was principally a result of the reduced asset base following this fresh start fair value adjustment. In July 2022, we sold a property that was subject to leaseback, generating approximately $70 million in proceeds.

During the nine months ended September 30, 2022, our capital expenditures were $1,860 million. In addition, we had $431 million of capital expenditures that were received but not paid as of September 30, 2022.

~~(8)~~(6) Other Intangibles:

The components of other intangibles as of September 30, 2022 and December 31, ~~2020~~2021 was as follows:

Predecessor
December 31, 2020
Gross Carrying
Accumulated
Net Carrying
($ in millions)
Amount
Amortization
Amount

Other Intangibles:
Customer base
$
4,332
$
(3,781)
$
551
Trade name
122
-
122
Royalty agreement
72
(68)
4
Total other intangibles
$
4,526
$
(3,849)
$
677



	September 30, 2022						December 31, 2021
	Gross Carrying		Accumulated		Net Carrying		Gross Carrying		Accumulated		Net Carrying
($ in millions)	Amount		Amortization		Amount		Amount		Amortization		Amount

Intangibles:
Customer Relationships - Business	$	800	$	(103)	$	697	$	800	$	(48)	$	752
Customer Relationships - Wholesale		3,491		(309)		3,182		3,491		(146)		3,345
Trademarks & Tradenames		150		(43)		107		150		(20)		130
Total other intangibles	$	4,441	$	(455)	$	3,986	$	4,441	$	(214)	$	4,227

2617

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

As a result of fresh start accounting, on the Effective Date, intangible assets and related accumulated amortization of the Predecessor were eliminated. Successor intangible assets were recorded at fair value as of the Effective Date. See Note 4. The balances of these assets as of September 30, 2021 are as follows:

Successor
September 30, 2021
Gross Carrying
Accumulated
Net Carrying
($ in millions)
Amount
Amortization
Amount

Other Intangibles:
Customer Relationships - Business
$
800
$
(30)
$
770
Customer Relationships - Wholesale
3,491
(91)
3,400
Trademarks & Tradenames
150
(13)
137
Total other intangibles
$
4,441
$
(134)
$
4,307

Amortization expense was as follows:

Successor
Predecessor
For the three months
For the three months
ended September 30,
ended September 30,
($ in millions)
2021
2020
Amortization expense
$
82
$
81
Successor
Predecessor
For the five months
For the four months
For the nine months
ended September 30,
ended April 30,
ended September 30,
($ in millions)
2021
2021
2020
Amortization expense
$
134
$
99
$
263


	For the three months ended September 30,		For the three months ended September 30,
($ in millions)	2022		2021

Amortization expense	$	81	$	82


	Successor				Predecessor
	For the nine months ended September 30,		For the five months ended September 30,		For the four months ended April 30,
($ in millions)	2022		2021		2021

Amortization expense	$	241	$	134	$	99

Following the Effective Date, we amortize our intangible assets on a straight-line basis, over the assigned useful lives of 16 years for our wholesale customer relationships, 11 years for our business customer relationships, and 5 years for our trademarks and tradenames.

For the Predecessor, amortization expense was primarily for our customer base acquired as a result of our acquisitions in 2010, 2014, and 2016 with each based on a useful life of 8 to 12 years and amortized on an accelerated method. Our trade name was an indefinite-lived intangible asset that was not subject to amortization.

~~Following our emergence from bankruptcy, we amortize~~ our intangible assets on a straight line basis, over the assigned useful lives of 16 years for our wholesale customer relationships, 11 years for our business customer relationships, and 5 years for our trademarks and tradenames.

~~PART I. FINANCIAL INFORMATION (Continued)~~

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

~~(Unaudited)~~

~~(9)~~ ~~Divestiture of Northwest Operations:~~

On May 1, 2020, Old Frontier completed the sale of its Northwest Operations pursuant to the terms and conditions of the Purchase Agreement, dated as of May 28, 2019, for gross proceeds of $1,352 million, subject to certain closing adjustments. Net of funding certain pension and other retiree medical liabilities, funding of indebtedness, funding certain escrows and other closing adjustments, we received $1,131 million in proceeds.

A portion of the proceeds from the sale were held in escrow as recourse for indemnity claims that may arise under the purchase agreement for a period of one year after the sale completion date. During the first and second quarters of 2021, all proceeds previously held in escrow related to indemnification obligations, employee liabilities, and adjustments to working capital were received by the Company and as of September 30, 2021, there are no remaining proceeds held in escrow accounts included in Other current assets.

As of May 28, 2019, the Northwest Operations were included in Frontier’s continuing operations and designated as assets held for sale and liabilities related to assets held for sale and we discontinued recording depreciation on Property, Plant and Equipment and finite-lived intangible assets of this business as required by GAAP. Upon closing of the transaction on May 1, 2020, we derecognized net assets of $1,132 million, including property, plant, and equipment of $1,084 million, goodwill of $658 million, a $603 million valuation allowance on our assets held for sale, and $150 million of defined benefit pension and other postretirement benefit plan obligations, net of transferred pension plan assets.

~~During the nine months ended September 30, 2020, Frontier recorded a loss on disposal of $160 million, associated with the sale of the Northwest Operations.~~

~~(10)~~(7) Fair Value of Financial Instruments:

The following table summarizes the carrying amounts and estimated fair values for total long-term debt at September 30, ~~2021~~2022 and December 31, ~~2020.~~2021. For the other financial instruments including cash, short-term investments, accounts receivable, restricted cash, accounts payable and other current liabilities, the carrying amounts approximate fair value due to the relatively short maturities of those instruments.

The fair value of our total long-term debt is estimated based upon quoted market prices at the reporting date for those financial instruments.

~~In applying fresh start accounting, our debt obligations were recognized at fair value on our consolidated balance sheet as of April 30, 2021, as described further in Note 4.~~

Successor
Predecessor
September 30, 2021
December 31, 2020
($ in millions)
Carrying Amount
Fair Value
Carrying Amount
Fair Value
Total debt
$
7,011
$
7,070
$
16,769
$
11,635



	September 30, 2022				December 31, 2021

($ in millions)		Carrying Amount		Fair Value		Carrying Amount		Fair Value

Total debt	$	8,966	$	8,015	$	7,777	$	7,996

(

2818

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

~~(11)~~(8) Long-Term Debt:

Chapter 11 Restructuring

The filing of the Chapter 11 Cases constituted an event of default that accelerated substantially all then-outstanding obligations under Old Frontier’s debt agreements and notes as follows:

the amended and restated credit agreement, dated as of February 27, 2017 (as amended, the JPM Credit Agreement),

the 8.000% first lien secured notes due April 1, 2027 (the Original First Lien Notes),

the 8.500% second lien secured notes due April 1, 2026 (the Original Second Lien Notes), and

the unsecured notes and debentures and the secured and unsecured debentures of the Company’s subsidiaries.

As of the Effective Date, amounts that were outstanding under the JPM Credit Agreement, the Original First Lien Notes, and the Original Second Lien Notes ~~have been~~were repaid in full.

Interest expense for the one and four months ended April 30, 2021 recorded on our Predecessor statements of ~~operations~~income was lower than contractual interest of ~~$450 million, because we ceased accruing interest on the Petition Date in accordance with the terms of the Plan and ASC Topic 852.~~

~~Interest expense for the three and nine months ended September 30, 2020 recorded on our Predecessor statements of operations was lower than contractual interest of $372~~$112 million and ~~$1,116~~$450 million, respectively, because we ceased accruing interest on the Petition Date in accordance with the terms of the Plan and ASC Topic 852.

‎

~~PART I. FINANCIAL INFORMATION (Continued)~~

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

~~(Unaudited)~~

The activity in our long-term debt is summarized as follows:



			For the nine months ended September 30, 2022
			Principal
	January 1,		Payments		New		September 30,
($ in millions)	2022		and Retirements		Borrowings		2022

Secured debt issued by Frontier	$	6,927	$	(11)	$	1,200	$	8,116
Secured debt issued by subsidiaries		100		-		-		100
Unsecured debt issued by subsidiaries		750		-		-		750
Principal outstanding	$	7,777	$	(11)	$	1,200	$	8,966

Less: Debt Issuance Costs		(13)						(29)
Less: Current Portion		(15)						(15)
Plus: Unamortized fair value adjustments ⁽¹⁾		219						198
Total Long-term debt	$	7,968					$	9,120


~~($ in millions)~~
~~Principal debt outstanding, December 31, 2020 (Predecessor)~~	$	~~16,769~~
~~Issuance of incremental term loan~~		~~225~~
~~Issuance of Takeback Notes~~		~~750~~
~~Conversion of Unsecured Senior Notes~~		~~(10,949)~~
~~Repayment of long term subsidiary debt at maturity~~		(1)
~~Principal debt outstanding, April 30, 2021 (Predecessor)~~		~~6,794~~
~~Less: Unamortized debt issuance costs~~		~~(2)~~
~~Less: Unamortized premium (discount)~~		~~(39)~~
~~Less: Long-term debt due within one year~~		~~(15)~~
~~Carrying amount of debt, April 30, 2021 (Predecessor)~~		~~6,738~~
~~Fresh start accounting fair value adjustment~~		~~277~~	⁽¹⁾
~~Long-term debt, April 30, 2021 (Predecessor)~~	$	~~7,015~~


~~Principal debt outstanding, April 30, 2021 (Successor)~~	$	~~6,794~~
~~Repayment of long-term debt at maturity~~		~~(8)~~
~~Principal debt outstanding, September 30, 2021 (Successor)~~		~~6,786~~	⁽²⁾
~~Less: Unamortized fair value adjustment~~		~~225~~
~~Less: Long-term debt due within one year~~		~~(15)~~
~~Long-term debt, September 30, 2021 (Successor)~~	$	~~6,996~~

⁽¹⁾Upon emergence, ~~Frontier~~we adjusted the carrying value of our debt to fair ~~value, in accordance with ASC 852.~~value. The adjustment consisted of the elimination of the existing unamortized debt issuance costs and unamortized discounts and recording a balance of $236 million as a fair value adjustment.The fair value accounting adjustment is being amortized into interest expense using the effective interest method. ~~This amortization resulted in $11 million for the five months ended September 30, 2021.~~

⁽²⁾Weighted average interest rate as of September 30, 2021 was 5.658%. Interest rate includes amortization of debt issuance costs and debt discounts. The interest rate at September 30, 2021 represent a weighted average of multiple issuances.

‎

3019

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

Additional information regarding our secured and unsecured total long-term debt as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 is as follows:

Successor
Predecessor
September 30, 2021
December 31, 2020
Principal
Interest
Principal
Interest
($ in millions)
Outstanding
Rate
Outstanding
Rate
Secured debt issued by Frontier
Term loan due 10/8/2027
$
1,468
4.500% (Variable)
$
1,250
5.750% (Variable)
First lien notes due 10/15/2027
1,150
5.875%
1,150
5.875%
First lien notes due 5/1/2028
1,550
5.000%
1,550
5.000%
Second lien notes due 5/1/2029
1,000
6.750%
1,000
6.750%
Takeback notes due 11/1/2029
750
5.875%
-
IDRB due 5/1/2030
13
6.200%
14
6.200%
Secured debt issued by Frontier
5,931
4,964
Unsecured debt issued by Frontier
Senior notes due 4/15/2020
-
172
8.500%
Senior notes due 9/15/2020
-
55
8.875%
Senior notes due 7/1/2021
-
89
9.250%
Senior notes due 9/15/2021
-
220
6.250%
Senior notes due 4/15/2022
-
500
8.750%
Senior notes due 9/15/2022
-
2,188
10.500%
Senior notes due 1/15/2023
-
850
7.125%
Senior notes due 4/15/2024
-
750
7.625%
Senior notes due 1/15/2025
-
775
6.875%
Senior notes due 9/15/2025
-
3,600
11.000%
Debentures due 11/1/2025
-
138
7.000%
Debentures due 8/15/2026
-
2
6.800%
Senior notes due 1/15/2027
-
346
7.875%
Senior notes due 8/15/2031
-
945
9.000%
Debentures due 10/1/2034
-
1
7.680%
Debentures due 7/1/2035
-
125
7.450%
Debentures due 10/1/2046
-
193
7.050%
Unsecured debt issued by Frontier
-
10,949
Secured debt issued by subsidiaries
Debentures due 11/15/2031
100
8.500%
100
8.500%
RUS loan contracts due 1/3/2028
5
6.154%
6
6.154%
Secured debt issued by subsidiaries
105
106
Unsecured debt issued by subsidiaries
Debentures due 5/15/2027
200
6.750%
200
6.750%
Debentures due 2/1/2028
300
6.860%
300
6.860%
Debentures due 2/15/2028
200
6.730%
200
6.730%
Debentures due 10/15/2029
50
8.400%
50
8.400%
Unsecured debt issued by subsidiaries
750
750
Debt prior to reclassification to
liabilities subject to compromise
6,786
5.657% ⁽¹⁾
16,769
8.188% ⁽¹⁾
Less: debt subject to compromise
-
(10,949)
Unamortized fair value adjustment
225
-
Carrying amount of Total debt
$
7,011
$
5,820


	September 30, 2022			December 31, 2021
	Principal		Interest	Principal		Interest
($ in millions)	Outstanding		Rate	Outstanding		Rate

Secured debt issued by Frontier
Term loan due 10/8/2027	$	1,453	6.063% (Variable)	$	1,464	4.500% (Variable)
First lien notes due 10/15/2027		1,150	5.875%		1,150	5.875%
First lien notes due 5/1/2028		1,550	5.000%		1,550	5.000%
First lien notes due 5/15/2030		1,200	8.750%		-	n/a
Second lien notes due 5/1/2029		1,000	6.750%		1,000	6.750%
Second lien notes due 11/1/2029		750	5.875%		750	5.875%
Second lien notes due 1/15/2030		1,000	6.000%		1,000	6.000%
IDRB due 5/1/2030		13	6.200%		13	6.200%
Total secured debt issued by Frontier		8,116			6,927

Secured debt issued by subsidiaries
Debentures due 11/15/2031		100	8.500%		100	8.500%
Total secured debt issued by subsidiaries		100			100

Unsecured debt issued by subsidiaries
Debentures due 5/15/2027		200	6.750%		200	6.750%
Debentures due 2/1/2028		300	6.860%		300	6.860%
Debentures due 2/15/2028		200	6.730%		200	6.730%
Debentures due 10/15/2029		50	8.400%		50	8.400%
Total unsecured debt issued by subsidiaries		750			750

Principal outstanding	$	8,966	6.366% ⁽¹⁾	$	7,777	5.702% ⁽¹⁾

(1)Interest rate represents a weighted average of the stated interest rates of multiple issuances.

‎Credit Facilities and Term Loans

Summaries of our various credit and debt agreements, including our credit agreements and the indentures for our senior secured first lien notes and senior secured second lien notes, are contained in our Annual Report on Form 10-K. The summaries below and in our Form 10-K do not purport to be complete and are qualified in their entirety by reference to the respective agreements filed as an Exhibit to our Annual Report on Form 10-K.

First Lien Notes due 2030

On May 12, 2022, our consolidated subsidiary Frontier Communications Holdings, LLC (“Frontier Holdings”) issued $1.2 billion aggregate principal amount of 8.750% First Lien Secured Notes due 2030 (the “First Lien Notes due 2030”) in an offering pursuant to exemptions from the registration requirements of the Securities Act. We intend to use the net proceeds of this offering to fund capital investments and operating costs arising from our fiber build and expansion of our fiber customer base, and for general corporate purposes.

The First Lien Notes due 2030 are secured by a first-priority lien, subject to permitted liens, by all the assets that secure the issuer’s obligations under its senior secured credit facilities and existing senior secured notes. The First Lien Notes due 2030 were issued pursuant to an indenture, dated as of May 12, 2022, by and among

3120

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

~~Credit Facilities~~Frontier Holdings, the guarantors party thereto, the grantor party thereto, Wilmington Trust, National Association, as trustee and ~~Term Loans~~

~~Credit Agreements~~

~~On October 8, 2020, Old Frontier entered into that certain Credit Agreement with~~ JPMorgan Chase Bank, N.A. ~~(“JPM”)~~, as ~~administrative agent and~~ collateral agent, and each lender from time to time party thereto (the “DIP to Exit Term Credit Agreement”), which provided for a senior secured superpriority DIP term loan facility in the aggregate principal amount of $500 million (the “Initial DIP Term Loan Facility”). On November 25, 2020, Old Frontier entered into an incremental amendment to the DIP to Exit Term Credit Agreement (the “Incremental DIP Term Loan Amendment”), which provided for an additional senior secured superpriority DIP term loan facility in the aggregate principal amount of $750 million (the “Incremental DIP Term Loan Facility” and, together with the Initial DIP Term Loan Facility, the “DIP Term Loan Facility”). On April 14, 2021, Old Frontier entered into a Refinancing and Incremental Facility Amendment No. 2 (the “Refinancing and Incremental Amendment”), providing for, among other things, an amendment to the Amended and Restated Credit Agreement (as defined below) providing for the New Incremental Commitment (as defined below).

On October 8, 2020, Old Frontier also entered into the debtor-in-possession revolving facility (the “DIP Revolving Facility”), pursuant to the Senior Secured Superpriority Debtor-In-Possession Credit Agreement, dated as of October 8, 2020, by and among Old Frontier, as the borrower and a debtor and debtor-in-possession under Chapter 11 of the Bankruptcy Code, Goldman Sachs Bank USA, as administrative agent, JPM, as collateral agent and each lender and issuing bank from time to time party thereto (the “DIP to Exit Revolving Credit Agreement”).

Pursuant to the Refinancing and Incremental Amendment, JPM agreed to provide, subject to certain conditions, including emergence from the Chapter 11 Cases, an incremental exit term loan facility in an aggregate principal amount of $225 million (the “New Incremental Commitment”). The New Incremental Commitment replaced the original incremental commitment, with certain of old Frontier’s noteholders and/or their affiliates.

In connection with the emergence from the Chapter 11 Cases, on the Effective Date, Frontier Communications Holdings, LLC, a Delaware limited liability company and indirect subsidiary of the Company (the “Borrower” or the “New Frontier Issuer”, as the case may be) entered into that certain Amended and Restated Credit Agreement with JPM, as administrative agent and collateral agent, Goldman Sachs Bank USA, as revolver agent, and each lender from time to time party thereto (the “Amended and Restated Credit Agreement”) to amend and restate the DIP to Exit Term Credit Agreement to, among other things, incorporate the DIP Revolving Facility from the DIP to Exit Revolving Credit Agreement, which incorporation resulted in the termination of the DIP to Exit Revolving Credit Agreement. Pursuant to the Amended and Restated Credit Agreement, the DIP Term Loan Facility was converted into an exit term loan facility in an aggregate principal amount of $1,468 million after giving effect to the New Incremental Commitment (the “Term Loan Facility”) and the DIP Revolving Facility converted into an exit revolving facility in the aggregate principal amount of $625 million (the “Revolving Facility”) and became subject to the Amended and Restated Credit Agreement.

~~Term Loan Facility~~

The Term Loan Facility’s maturity date is October 8, 2027. At the Borrower’s election, the determination of interest rates for the Term Loan Facility is based on margins over the alternate base rate or over LIBOR. The interest rate margin with respect to any LIBOR loan under the Term Loan Facility is 3.75% for LIBOR loans or 2.75% with respect to any alternate base rate loan, with a 0.75% LIBOR floor.

Subject to certain exceptions and thresholds, the security package under the Term Loan Facility includes pledges of the equity interests in certain of our subsidiaries, which as of the issue date is limited to certain specified pledged entities and substantially all personal property of Frontier Video Services Inc., a Delaware corporation (“Frontier Video”), which same assets also secure the First Lien Notes (as defined below). The Term Loan Facility is guaranteed by the same subsidiaries that guarantee the First Lien Notes.

~~PART I. FINANCIAL INFORMATION (Continued)~~

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

~~(Unaudited)~~

The Term Loan Facility includes customary negative covenants for loan agreements of this type, including covenants limiting the Borrower and its restricted subsidiaries’ (other than certain covenants therein which are limited to subsidiary guarantors) ability to, among other things, incur additional indebtedness, create liens on assets, make investments, loans or advances, engage in mergers, consolidations, sales of assets and acquisitions, pay dividends and distributions and make payments in respect of certain material payment subordinated indebtedness, in each case subject to customary exceptions for loan agreements of this type.

The Term Loan Facility also includes certain customary representations and warranties, affirmative covenants and events of default, including, but not limited to, payment defaults, breaches of representations and warranties, covenant defaults, certain events under ERISA, upon the conversion date, unstayed judgments in favor of a third-party involving an aggregate liability in excess of a certain threshold, change of control, upon the conversion date, specified governmental actions having a material adverse effect or condemnation or damage to a material portion of the collateral.agent.

Revolving Facility

On May 12, 2022, Frontier Holdings entered into an amendment (“Amendment No. 2”) to its Revolving Facility. Amendment No. 2, among other things, increased the Revolving Facility by an additional $275 million, to a total of $900 million in aggregate principal amount of revolving credit commitments, and provided that the Revolving Facility be amended to reflect Secured Overnight Financing Rate “SOFR” based interest rates (including a customary spread adjustment).

The ~~$625~~$900 million Revolving Facility will be available on a revolving basis until April 30, 2025.

At ~~the Borrower’s~~Frontier’s election, the determination of interest rates for the Revolving Facility is based on margins over the alternate base rate or over ~~LIBOR.~~SOFR. The interest rate margin with respect to any ~~LIBOR~~SOFR loan under the Exit Revolving Facility is 3.50% or 2.50% with respect to any alternate base rate loans, with a 0% ~~LIBOR~~SOFR floor.

Subject to customary exceptions and thresholds, the security package under the Revolving Facility includes pledges of the equity interests in certain of our subsidiaries, which as of the issue date is limited to certain specified pledged entities and substantially all personal property of Frontier Video, which same assets also secure the First Lien Notes. The Revolving Facility is guaranteed by the same subsidiaries that guarantee the First Lien Notes. After giving effect to ~~$90~~$133 million of revolver letters of credit ~~previously~~ outstanding as of September 30, 2022, the ~~Borrower~~Company has ~~$535~~$767 million of available borrowing capacity under the Revolving Facility.

The Revolving Facility includes customary negative covenants for loan agreements of this type, including covenants limiting the Borrower and its restricted subsidiaries’ (other than certain covenants therein which are limited to subsidiary guarantors) ability to, among other things, incur additional indebtedness, create liens on assets, make investments, loans or advances, engage in mergers, consolidations, sales of assets and acquisitions, pay dividends and distributions and make payments in respect of certain material payment subordinated indebtedness, in each case subject to customary exceptions for loan agreements of this type.

The Revolving Facility also includes certain customary representations and warranties, affirmative covenants and events of default, including, but not limited to, payment defaults, breaches of representations and warranties, covenant defaults, certain events under ERISA, change of control or damage to a material portion of the collateral.

‎

~~PART I. FINANCIAL INFORMATION (Continued)~~

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

~~(Unaudited)~~

~~Senior Secured Notes~~

~~Second Lien Notes due 2030~~

On October 13, 2021, New Frontier Issuer issued $1.0 billion aggregate principal amount of 6.000% Second Lien Secured Notes due 2030 (the “Second Lien Notes due 2030”) in an offering pursuant to exemptions from the registration requirements of the Securities Act of 1933, as amended. The Company intends to use the net proceeds of this offering to fund capital investments and operating costs arising from the Company’s fiber build and expansion of its fiber customer base, and for general corporate purposes.

The Second Lien Notes due 2030 were issued pursuant to an indenture, dated as of October 13, 2021 (the “Second Lien 2030 Indenture”), by and among the Issuer, the guarantors party thereto, the grantor party thereto and Wilmington Trust, National Association, as trustee and as collateral agent.

~~Second Lien Notes due May 2029~~

In connection with the DIP financing, on November 25, 2020, Old Frontier issued $1.0 billion aggregate principal amount of 6.750% Second Lien Secured Notes due May 1, 2029 (the “Second Lien Notes due May 2029”).

The Second Lien Notes due May 2029 were issued pursuant to an indenture, dated as of November 25, 2020 (the “Second Lien May 2029 Indenture”), by and among Old Frontier, the guarantors party thereto, the grantor party thereto and Wilmington Trust, National Association, as trustee and as collateral agent.

On the Effective Date, in accordance with the Second Lien May 2029 Indenture and the Plan, New Frontier Issuer entered into a supplemental indenture with Wilmington Trust, National Association, as trustee, and assumed the obligations under the Second Lien Notes due May 2029 and the Second Lien May 2029 Indenture.

~~Second Lien Notes due November 2029 or “Takeback Notes”~~

~~On April 30, 2021, New Frontier Issuer issued $750 million aggregate principal amount of 5.875% Second Lien Secured Notes due~~ ~~November 2029~~ (the “Second Lien Notes due November 2029” or the “Takeback Notes”) pursuant to an indenture, dated as of April 30, 2021 (the “Takeback Notes Indenture”), by and among New Frontier Issuer, the guarantors party thereto, the grantor party thereto and Wilmington Trust, National Association, as trustee and as collateral agent. At Old Frontier’s direction, the Takeback Notes were issued to holders of claims arising under, derived from, based on, or related to the unsecured notes issued by Old Frontier in partial satisfaction of such claims.

The Second Lien Notes due 2030, the Second Lien Notes due May 2029 and the Takeback Notes are collectively referred to as the Second Lien Notes. The Second Lien 2030 Indenture, the Second Lien May 2029 Indenture and the Takeback Notes Indenture are collectively referred to as the Second Lien Notes Indentures. The Second Lien Notes and the First Lien Notes (as defined below) are referred to herein collectively as the “Notes”.

The Second Lien Notes are secured by a second-priority lien, subject to permitted liens, by all the assets that secure New Frontier Issuer’s obligations under the Term Loan Facility, the Revolving Facility and the First Lien Notes (as defined below).

The Second Lien Notes Indentures contain customary negative covenants, subject to a number of important exceptions and qualifications, including, without limitation, covenants related to incurring additional debt and issuing preferred stock; incurring or creating liens; redeeming and/or prepaying certain debt; paying dividends on stock or repurchasing stock; making certain investments; engaging in specified sales of assets; entering into transactions with affiliates; and engaging in consolidation, mergers and acquisitions. Certain of these covenants will be suspended during such time, if any, that the Second Lien Notes have investment grade

~~PART I. FINANCIAL INFORMATION (Continued)~~

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

~~(Unaudited)~~

ratings by at least two of Moody’s, S&P or Fitch. The Second Lien Notes Indentures also provides for customary events of default which, if any of them occurs, would permit or require the principal of and accrued interest on the Second Lien Notes to become or to be declared due and payable.

~~First Lien Notes~~

In connection with the DIP financing, (a) on October 8, 2020, Old Frontier issued $1,150 million aggregate principal amount of 5.875% First Lien Secured Notes due October 15, 2027 (the “First Lien Notes due 2027”) and (b) on November 25, 2020, Old Frontier issued $1,550 million aggregate principal amount of 5.000% First Lien Secured Notes due May 1, 2028 (the “First Lien Notes due 2028” and, together with the First Lien Notes due 2027, the “First Lien Notes”).

The First Lien Notes due 2027 were issued pursuant to an indenture, dated as of October 8, 2020 (the “2027 First Lien Indenture”), by and among Old Frontier, the guarantors party thereto, the grantor party thereto, JPMorgan Chase Bank N.A., as collateral agent, and Wilmington Trust, National Association, as trustee. The First Lien Notes due 2028 were issued pursuant to an indenture, dated as of November 25, 2020 (the “2028 First Lien Indenture” and, together with the 2027 First Lien Indenture, the “First Lien Indentures”), by and among Old Frontier, the guarantors party thereto, the grantor party thereto, JPMorgan Chase Bank N.A., as collateral agent and Wilmington Trust, National Association, as trustee.

On the Effective Date, in accordance with the Indentures and the Plan, New Frontier Issuer entered into supplemental indentures to the First Lien Indentures with Wilmington Trust, National Association, as trustee, and assumed the obligations under each series of the First Lien Notes and each of the First Lien Indentures.

~~The First Lien Notes~~ are secured on a first-priority basis and pari passu with its senior secured credit facilities, subject to permitted liens and certain exceptions, by all the assets that secure Frontier’s obligations under the Term Loan Facility and the Revolving Facility.

The First Lien Indentures contain customary negative covenants, subject to a number of important exceptions and qualifications, including, without limitation, covenants related to incurring additional debt and issuing preferred stock; incurring or creating liens; redeeming and/or prepaying certain debt; paying dividends on our stock or repurchasing stock; making certain investments; engaging in specified sales of assets; entering into transactions with affiliates; and engaging in consolidation, mergers and acquisitions. Certain of these covenants will be suspended during such time, if any, that the First Lien Notes have investment grade ratings by at least two of Moody’s, S&P or Fitch. The First Lien Notes Indentures also provides for customary events of default which, if any of them occurs, would permit or require the principal of and accrued interest on the First Lien Notes to become or to be declared due and payable.

~~(12)~~(9) Restructuring Costs and Other Charges:

Restructuring and other charges consists of severance and employee costs related to workforce reductions. It also includes professional fees related to our Chapter 11 Cases that were incurred after the ~~emergence date~~Effective Date as well as professional fees related to our restructuring and transformation that were incurred prior to the Petition Date.

During the nine month period ended September 30, 2022, we incurred $88 million in restructuring charges and other costs consisting of $44 million of lease impairment costs from the strategic exit of certain facilities, $35 million of severance and employee costs resulting from workforce reductions, and $9 million of costs related to other restructuring activities. Of the $35 million in severance and employee costs, approximately $26 million related to the second quarter of 2022, as a result of larger workforce reductions in that period.

As part of Frontier’s cost reduction strategy, certain real estate leases will not be retained, or will be marketed for sublease. We evaluated the related right-of-use assets and other lease related assets for impairment under ASC 360. In connection with this analysis, we reassessed our leased real estate asset groups and estimated the fair value of the office space to be subleased under current market conditions. Where the carrying values of individual asset groups exceeded their fair values, an impairment charge was recognized for the difference.

During the four months ended April 30, 2021, we incurred $7 million of severance and employee costs resulting from workforce reductions. During the five months ended September 30, 2021, we incurred $19 million in expenses consisting of $6 million of severance and employee costs resulting from workforce reductions and ~~$13~~$13 million of professional fees related to our balance sheet restructuring.

During the nine-month period ended September 30, 2020, we incurred $87 million in restructuring expenses consisting of $8 million directly associated with transformation initiatives, $7 million of severance and employee costs resulting from workforce reductions, and $72 million of consulting and advisory costs related to our balance

~~PART I. FINANCIAL INFORMATION (Continued)~~

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

~~(Unaudited)~~

~~sheet restructuring activities through the Petition Date.~~

~~The following is a summary of the changes in the liabilities established for restructuring and other related programs:~~


~~($ in millions)~~

~~Balance at January 1, 2021 (Predecessor)~~	$	2
~~Severance expense~~		7
~~Cash payments during the period~~		~~(2)~~
~~Balance at April 30, 2021 (Predecessor)~~	$	7


~~Balance at April 30, 2021 (Successor)~~	$	7
~~Severance expense~~		6
~~Other costs~~		13
~~Cash payments during the period~~		~~(18)~~
~~Balance at September 30, 2021 (Successor)~~	$	8

~~(10)~~

~~(13)~~ ~~Investment and Other Income:~~

~~The following is a summary of the components of Investment and Other Income:~~

Successor
Predecessor
For the three months
For the three months
ended September 30,
ended September 30,
($ in millions)
2021
2020
Interest and dividend income
$
1
$
-
Pension and OPEB costs
(36)
(16)
All other, net
(2)
2
Total investment and other loss, net
$
(37)
$
(14)
Successor
Predecessor
For the five months
For the four months
For the nine months
ended September 30,
ended April 30,
ended September 30,
($ in millions)
2021
2021
2020
Interest and dividend income
$
1
$
-
$
4
Pension and OPEB benefit (costs)
(40)
2
(35)
All other, net
-
(1)
2
Total investment and other income (loss), net
$
(39)
$
1
$
(29)

~~Pension and OPEB credit (cost) consists of interest costs, expected return on plan assets, amortization of prior service costs (credit) and recognition of actuarial (gain) loss.~~

‎

3621

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

~~(14)~~ ~~Income Taxes~~:

The following is a ~~reconciliation~~summary of the ~~provision~~changes in the liabilities established for ~~income taxes computed at the federal statutory rate to income taxes computed at the effective rate:~~restructuring and other related programs:

Successor
Predecessor
For the three months
For the three months
ended September 30,
ended September 30,
($ in millions)
2021
2020
Consolidated tax provision at federal statutory rate
21.0
%
21.0
%
State income tax provisions, net of federal income
tax expense (benefit)
-
(792.5)
Changes in certain deferred tax balances
2.0
1,317.2
Interest expense deduction
-
(1,592.1)
Restructuring cost
-
694.1
Tax reserve adjustment
(0.1)
-
Federal research and development tax credit
0.3
-
All other, net
(3.5)
16.2
Effective tax rate
19.7
%
(336.1)
%
Successor
Predecessor
For the five months
For the four months
For the nine months
ended September 30,
ended April 30,
ended September 30,
($ in millions)
2021
2021
2020
Consolidated tax provision at federal statutory rate
21.0
%
21.0
%
21.0
%
State income tax provisions, net of federal income
tax expense (benefit)
2.8
0.5
11.5
Changes in certain deferred tax balances
-
-
(13.9)
Interest expense deduction
-
-
22.6
Restructuring cost
-
0.3
(10.3)
Loss on disposal of Northwest Operations
-
-
(8.1)
Tax reserve adjustment
0.2
-
(0.7)
Fresh start and reorganization adjustments
-
(24.9)
-
Shared-based payments
-
-
(0.3)
Federal research and development tax credit
(0.5)
-
(0.5)
All other, net
1.2
-
(0.7)
Effective tax rate
24.7
%
(3.1)
%
20.6
%



($ in millions)

Balance at January 1, 2022	$	7
Severance expense		35
Other costs		9
Cash payments during the period		(45)
Balance at September 30, 2022	$	6

Under ASC 740 – 270, income tax expense for the four months ended April 30, 2021, is based on the actual year to date effective tax rate for the first four months of the year inclusive of the impact of the fresh start and reorganization adjustments. Income tax expense for the five months ended September 30, 2021 is based on an annual effective tax rate for the successor period with the exclusion of the discrete items.

Frontier considered positive and negative evidence in regard to evaluating certain deferred tax assets during the second quarter of 2021, including the development of recent years of pre-tax book losses. On the basis of this evaluation, a valuation allowance of $111 million ($88 million net of federal benefit) was recorded as of September 30, 2021.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic. As part of the CARES Act, employers were allowed to defer payment of

‎

~~PART I. FINANCIAL INFORMATION (Continued)~~

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

~~(Unaudited)~~

the employer’s share of the Social Security tax that they otherwise were responsible for paying on wages. The deferral applied to affected taxes that were normally required to be paid from March 27, 2020, through December 31, 2020. These deferred taxes must be paid in equal amounts in 2021 and 2022. ~~As of September 30, 2021, Frontier has deferred the payments of approximately $60 million in such taxes.~~

As described more fully in Note 1 and Note 3, the Company emerged from bankruptcy on April 30, 2021, and consummated a taxable disposition of substantially all of the assets and/or subsidiary stock of the Company and utilized substantially all of the Company’s Net Operating Losses (“NOLs”).

~~(15)~~ ~~Net Earnings (Loss) Per Share~~:

~~The reconciliation of the net earnings (loss) per share calculation is as follows~~:

Successor
Predecessor
For the three months
For the three months
ended September 30,
ended September 30,
($ in millions)
2021
2020
Net income used for basic and diluted earnings
per share:
Total basic net income
attributable to Frontier common shareholders
$
126
$
15
Effect of loss related to dilutive stock units
-
-
Total diluted net income
attributable to Frontier common shareholders
$
126
$
15
Basic earnings per share:
Total weighted average shares and unvested restricted stock
awards outstanding - basic
244,403
104,919
Less: Weighted average unvested restricted stock awards
-
(393)
Total weighted average shares outstanding - basic
244,403
104,526
Basic net earnings per share
attributable to Frontier common shareholders
$
0.52
$
0.14
Diluted earnings per share:
Total weighted average shares outstanding - basic
244,403
104,526
Effect of dilutive stock units
1,264
340
Total weighted average shares outstanding - diluted
245,667
104,866
Diluted net earnings per share
attributable to Frontier common shareholders
$
0.51
$
0.14

~~PART I. FINANCIAL INFORMATION (Continued)~~

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

~~(Unaudited)~~

Successor
Predecessor
For the five months
For the four months
For the nine months
ended September 30,
ended April 30,
ended September 30,
($ in millions)
2021
2021
2020
Net income (loss) used for basic and diluted earnings (loss)
per share:
Total basic net income (loss)
attributable to Frontier common shareholders
$
225
$
4,541
$
(352)
Effect of loss related to dilutive stock units
-
-
-
Total diluted net income (loss)
attributable to Frontier common shareholders
$
225
$
4,541
$
(352)
Basic earnings (loss) per share:
Total weighted average shares and unvested restricted stock
awards outstanding - basic
244,402
104,799
104,989
Less: Weighted average unvested restricted stock awards
-
(215)
(529)
Total weighted average shares outstanding - basic
244,402
104,584
104,460
Basic net earnings (loss) per share
attributable to Frontier common shareholders
$
0.92
$
43.42
$
(3.37)
Diluted earnings (loss) per share:
Total weighted average shares outstanding - basic
244,402
104,584
104,460
Effect of dilutive shares
1,198
340
-
Total weighted average shares outstanding - diluted
245,600
104,924
104,460
Diluted net earnings (loss) per share
attributable to Frontier common shareholders
$
0.92
$
43.28
$
(3.37)

~~Restricted Stock~~

In calculating diluted net income per common share for the three and five months ended September 30, 2021, 1,264,000 and 1,198,000 restricted stock shares have been included in the calculation as the effect would be dilutive.

~~Stock Units~~

As of September 30, 2021, there were 0 stock units outstanding. As of April 30, 2021, there were 339,544 stock units issued under Old Frontier director and employee compensation plans that were included in the diluted EPS calculation for the four months ended April 30, 2021 as the effect would be dilutive.

~~PART I. FINANCIAL INFORMATION (Continued)~~

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

~~(Unaudited)~~

~~(16)~~ ~~Stock Plans~~:

Upon emergence, all outstanding stock-based compensation plans of Old Frontier were terminated and, in accordance with the Plan, the form of the Frontier Communications Parent, Inc. 2021 Management Incentive Plan (the “Incentive Plan”) was approved and adopted by the Board. The Incentive Plan permits stock-based awards to be made to employees, directors, or consultants of the Company or its affiliates, as determined by the Compensation and Human Capital Committee. At emergence, there were 15,600,000 shares of Common Stock reserved for issuance pursuant to the Incentive Plan. As of September 30 2021, the Company had awarded an aggregate of approximately 5,278,041 unvested restricted stock units and performance stock units (which reflects the “target” number of performance stock units subject to performance conditions granted to certain officers), under the Incentive Plan to certain employees, directors and officers of the Company, subject to satisfaction of the applicable vesting conditions.

~~Restricted Stock~~

~~The following summary presents information regarding unvested restricted stock with regard to restricted stock granted under the 2017 EIP and 2021 Incentive Plan~~:

2017 EIP
Weighted
Average
Number of
Grant Date
Aggregate
Shares
Fair Value
Fair Value
(in thousands)
(per share)
(in millions)
Balance at January 1, 2021 (Predecessor)
304
$
6.78
$
-
Restricted stock granted
-
$
-
$
-
Restricted stock vested
(41)
$
8.23
$
-
Restricted stock forfeited
(109)
$
8.23

Balance at April 30, 2021 (Predecessor)
154
$
5.38
$
-
Cancellation of restricted stock
(154)
$
-
$
-
Balance at April 30, 2021 (Predecessor)
-
$
-
$
-
2021 Incentive Plan
Weighted
Average
Number of
Grant Date
Aggregate
Shares
Fair Value
Fair Value
(in thousands)
(per share)
(in millions)
Balance at April 30, 2021 (Successor)
-
$
-
$
-
Restricted stock granted
2,365
$
28.75
$
66
Restricted stock vested
(9)
$
28.75
$
-
Restricted stock forfeited
(42)
$
28.75

Balance at September 30, 2021 (Successor)
2,314
$
28.75
$
65

~~For purposes of determining compensation expense,~~ ~~the fair value of each restricted stock grant is estimated based on the closing price of a share of our common stock on the date of the grant. Total remaining unrecognized~~compensation cost associated with unvested restricted stock awards that is deferred at September 30, 2021 was $63 million, and the weighted average vesting period over which this cost is expected to be recognized is approximately 2 years.

4022

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

~~We have granted restricted stock~~(10) Investment and Other Income:

The following is a summary of the components of Investment and Other Income:


	For the three months ended September 30,		For the three months ended September 30,
($ in millions)	2022		2021

Interest and dividend income	$	16	$	1
Pension benefit		24		23
OPEB costs		(5)		(59)
OPEB remeasurement gain		84		-
Pension remeasurement gain		91		-
All other, net		1		(2)
Total investment and other income (loss), net	$	211	$	(37)


	Successor				Predecessor
	For the nine months ended September 30,		For the five months ended September 30,		For the four months ended April 30,
($ in millions)	2022		2021		2021

Interest and dividend income	$	24	$	1	$	-
Pension benefit		74		36		6
OPEB costs		(13)		(76)		(4)
OPEB remeasurement gain		234		-		-
Pension remeasurement gain		91		-		-
All other, net		-		-		(1)
Total investment and other income (loss), net	$	410	$	(39)	$	1

In the first nine months of 2022, Frontier amended the medical coverage for certain postretirement benefit plans, which resulted in remeasurement gains of $234 million, primarily due to discount rate changes. As a result of pension settlement charges incurred during the period, Frontier remeasured its pension plan obligations, resulting in a remeasurement gain of $91 million for the nine months ended September 30, 2022. Refer to Note 15 for further details.

Pension and OPEB benefit (costs) consist of interest income (loss), expected return on plan assets, amortization of prior service costs (credit) and recognition of actuarial gain (loss).

‎

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

(11) Stock Plans:

Upon emergence, the Frontier Communications Parent, Inc. 2021 Management Incentive Plan (the “2021 Incentive Plan”) was approved and adopted by the Board. The 2021 Incentive Plan permits stock-based awards to be made to employees, directors, or consultants of the Company or its affiliates, as determined by the Compensation and Human Capital Committee of the Board. Under the 2021 Incentive Plan, 15,600,000 shares of common stock have been reserved for issuance. Equity awards have been issued in the form of time-based restricted stock units (RSUs) and performance-based stock units (PSUs). As of September 30, 2022, unvested awards relating to approximately 2,090,000 shares were outstanding under our long-term incentive plan. Further, upon emergence, all outstanding stock-based compensation plans of Old Frontier were terminated.

Restricted Stock Units

The following summary presents information regarding unvested RSUs under the 2021 Incentive Plan:


2021 Incentive Plan
		Weighted
		Average
	Number of	Grant Date		Aggregate
	Shares	Fair Value		Fair Value
	(in thousands)	(per share)		(in millions)
Balance at January 1, 2022	2,483	$	28.67	$	72
Restricted stock granted	1,078	$	25.86	$	25
Restricted stock vested	(862)	$	25.73	$	(20)
Restricted stock forfeited	(140)	$	25.86
Balance at September 30, 2022	2,559	$	25.83	$	60

For purposes of determining compensation expense, the fair value of each RSU grant is based on the closing price of our common ~~stock.~~ stock on the date of grant. The non-vested RSUs granted in 2021 and 2022 generally vest, and are expensed, on a ratable basis over three years from the grant date of the award. Total remaining unrecognized compensation cost associated with unvested RSU awards that is deferred at September 30, 2022 was $56 million and the weighted average vesting period over which this cost is expected to be recognized is approximately 2 years.

None of the ~~restricted stock~~RSU awards may be sold, assigned, pledged, or otherwise transferred, voluntarily or involuntarily, by the employees until the applicable time-based restrictions lapse, subject to limited exceptions. ~~The restrictions are time-based.~~RSUs, when vested, will be paid out in the form of common stock. Compensation expense, including compensation related to non-employee directors, recognized in “Selling, general, and administrative ~~expenses,”~~expenses”, of $4$27 million for the ~~three and five month period~~nine month-period ended September 30, ~~2021,~~2022, has been recorded in connection with ~~these grants. During the four months ended April 30, 2021, Old Frontier recognized stock-based compensation credit of $1 million related to Old Frontier Director and Employee Compensation Plans.~~RSUs.

Performance Stock Units

On July 7, 2021, Frontier’s Compensation and Human Capital Committee, in consultation with the other directors of Frontier’s Board of Directors and the Committee’s independent executive compensation consultant, reviewed and approved a long-term equity award program or “Emergence LTI Program” underUnder the 2021 ~~Management~~ Incentive Plan, ~~(“MIP”).~~

~~The Emergence LTI Program consists~~a target number of ~~both Restricted Stock Units (RSUs) and Performance Stock Units (PSUs). RSUs are time-based awards that vest over time and the value reflects the stock price of the Company.~~ PSUs are ~~tied~~awarded to ~~the financial performance and long-term target of the Company and consist of~~certain participants with respect to a three-year performance period (a ~~Measurement Period)~~“Measurement Period”). ~~A target number of performance units are awarded to each participant with respect to the Measurement Period.~~ The performance metrics under the 2021 and 2022 PSU grants consist of targets for (1) Adjusted Fiber EBITDA, (2) Fiber Locations Constructed and (3) Expansion Fiber Penetration. In addition, there is an overall ~~performance~~relative total shareholder return (“TSR”) modifier, which is based on Frontier’s total return to stockholders over the Measurement Period ~~(i.e., Total Shareholder Return or TSR)~~ relative to the S&P 400 Mid Cap ~~index. The TSR~~Index. Each performance ~~modifier can decrease or increase payouts based on Frontier’s three-year performance. PSU~~metric is weighted 33.3%, and targets for each metric are set for each of the three years during the Measurement Period. Achievement of the metrics will be measured separately, and the number of awards ~~to the extent~~ earned will be ~~paid out in~~determined based on actual performance relative to the ~~form~~targets of ~~common stock shortly following~~each performance metric, plus the effect of the TSR modifier. Achievement is measured on a cumulative basis for each performance metric individually at the end of the three-yearMeasurement Period. The payout of the 2021 PSUs can range

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

from 0% to a maximum award payout of 300% of the target units. The payout of the 2022 PSUs can range from 0% to a maximum award payout of 200% of the target units.

The number of ~~shares of common stock or units~~PSU awards earned at the end of the Measurement Period may be more or less than the number of target ~~performance shares or units~~PSUs granted as a result of performance. An executive must maintain a satisfactory performance rating during the Measurement Period and generally must be employed by Frontier upon determination in order for the award to vest. The Compensation and Human Capital Committee will determine the number of shares earned for the Measurement Period in the first quarter of the year following the end of the Measurement Period. PSUs, to the extent earned, will be paid out in the form of common stock shortly following this determination.

Under ASC 718, Stock Based Compensation Expense, a grant date and the fair value of a performance award are determined once the targets are finalized. All targets for the 2021 awards have been set and the fair value of the grants will be amortized over the appropriate period. For the 2022 PSU awards, the targets related to two of the three performance metrics have not been established. As a result, we are recognizing expense with respect to 1/3 of the aggregate outstanding 2022 PSU awards over the appropriate period.

The following summary presents information regarding performance shares as of September 30, 2022 and changes during the nine months then ended with regard to performance shares awarded under the 2021 Incentive Plan:


2021 Incentive Plan
			Weighted
			Average
	Number of		Grant Date	Aggregate
	Shares		Fair Value	Fair Value
	(in thousands)		(per share)	(in millions)
Balance at January 1, 2022	3,144	$	25.62	$	92
Target performance shares awarded, net	388	$	25.66	$	9
Target performance shares forfeited	(47)	$	25.62
Balance at September 30, 2022	3,485	$	25.62	$	82

For purposes of determining compensation expense, the fair value of each performance share grant is estimated based on the closing price of a share of our common stock on the date of the grant, adjusted to reflect the fair value of the relative TSR modifier. For the nine months ended September 30, 2022, we recognized net compensation expense, reflected in “Selling, general, and administrative expenses,” of $27 million related PSU awards.

‎

4125

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

(12) Income Taxes:

The following is a reconciliation of the provision for income taxes computed at the federal statutory rate to income taxes computed at the effective rate:


	Successor						Predecessor
	For the three months ended September 30,		For the nine months ended September 30,		For the five months ended September 30,		For the four months ended April 30,
	2022		2022		2021		2021

Consolidated tax provision at federal statutory rate	21.0	%	21.0	%	21.0	%	21.0	%
State income tax expense, net of federal
income tax benefit	14.7		13.1		2.8		0.5
Changes in certain deferred tax balances	2.1		1.5		-		-
Restructuring cost	-		-		-		0.3
Fresh start and reorganization adjustments	-		-		-		(24.9)
Sec.162(m) - nondeductible Executive Compensation	1.5		2.5		-		-
All other, net	(0.8)		(0.3)		0.9		-
Effective tax rate	38.5	%	37.8	%	24.7	%	(3.1)	%

Frontier considered positive and negative evidence in regard to evaluating certain state deferred tax assets during the third quarter of 2022, including the development of recent years of pre-tax book losses. On the basis of this evaluation, a valuation allowance of $77 million ($61 million net of federal benefit) was recorded as of September 30, 2022.

The effective rate for the three and nine months ended September 30, 2022, increased as a result of increases to the state rate due to valuation allowances in certain states, arising from non-deductible interest expense primarily related to our $1.2 billion first lien note issuance.

The effective rate changes between the three and nine months ended September 30, 2022, as compared to 2021 are primarily due to, as described more fully in Note 1, the Company emergence from bankruptcy on April 30, 2021, and consummation of a taxable disposition of substantially all of the assets and/or subsidiary stock of the Company and utilized substantially all of the Company’s Net Operating Losses (“NOLs”).

The Inflation Reduction Act was signed into law on August 16, 2022. The law contains numerous changes to tax laws effective January 1, 2023. The Company is currently evaluating the effects, if any, of these changes.

‎

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

(13) Net Earnings Per Share:

The reconciliation of the net earnings per share calculation is as follows:


($ in millions and shares in thousands, except per share amounts)	For the three months ended September 30,		For the three months ended September 30,
	2022		2021
Net income used for basic and diluted earnings
per share:
Total basic net income
attributable to Frontier common shareholders	$	120	$	126
Effect of loss related to dilutive stock units		-		-
Total diluted net income
attributable to Frontier common shareholders	$	120	$	126

Basic earnings per share:
Total weighted average shares and unvested restricted stock
awards outstanding - basic		244,984		244,403
Less: Weighted average unvested restricted stock awards		-		-
Total weighted average shares outstanding - basic		244,984		244,403

Basic net earnings per share
attributable to Frontier common shareholders	$	0.49	$	0.52

Diluted earnings per share:
Total weighted average shares outstanding - basic		244,984		244,403
Effect of dilutive restricted stock awards		228		1,264
Total weighted average shares outstanding - diluted		245,212		245,667

Diluted net earnings per share
attributable to Frontier common shareholders	$	0.49	$	0.51

‎

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)


	Successor				Predecessor
($ in millions and shares in thousands, except per share amounts)	For the nine months ended September 30,		For the five months ended September 30,		For the four months ended April 30,
	2022		2021		2021
Net income used for basic and diluted earnings
per share:
Total basic net income
attributable to Frontier common shareholders	$	286	$	225	$	4,541
Effect of loss related to dilutive stock units		-		-		-
Total diluted net income
attributable to Frontier common shareholders	$	286	$	225	$	4,541

Basic earnings per share:
Total weighted average shares and unvested restricted stock
awards outstanding - basic		244,711		244,402		104,799
Less: Weighted average unvested restricted stock awards		-		-		(215)
Total weighted average shares outstanding - basic		244,711		244,402		104,584

Basic net earnings per share
attributable to Frontier common shareholders	$	1.17	$	0.92	$	43.42

Diluted earnings per share:
Total weighted average shares outstanding - basic		244,711		244,402		104,584
Effect of dilutive stock units		-		-		340
Effect of dilutive restricted stock awards		369		1,198		-
Total weighted average shares outstanding - diluted		245,080		245,600		104,924

Diluted net earnings per share
attributable to Frontier common shareholders	$	1.17	$	0.92	$	43.28

~~The following summary presents information regarding~~

In calculating diluted net income per common share for the nine months ended September 30, 2022, the effect of all outstanding PSUs is excluded from the computation as their respective performance ~~shares~~metrics have not been satisfied as of September 30, ~~2021 and changes during the nine months then ended with regard to performance shares awarded under the 2021 Incentive Plan~~:2022.

Stock Units


	~~2021 Incentive Plan~~
			~~Number of~~
			~~Shares~~
			~~(in thousands)~~
	~~Balance at April 30, 2021 (Successor)~~		-
	~~Target performance shares granted, net~~		~~2,975~~
	~~Target performance shares earned~~		-
	~~Target performance shares forfeited~~		~~(11)~~
	~~Balance at September 30, 2021 (Successor)~~		~~2,964~~

At September 30, 2021, the dilutive common stock equivalents consisted of stock units issued under the Non-Employee Directors’ Deferred Fee Equity Plan (Deferred Fee Plan), the Non-Employee Directors’ Equity Incentive Plan (Directors’ Equity Plan), the 2013 Equity Incentive Plan and the 2017 Equity Incentive Plan.

‎For purposes of determining compensation expense, the fair value of each performance share grant is estimated based on the closing price of a share of our common stock on the date of the grant. For the three and five months ended September 30, 2021, we recognized net compensation expense, reflected in “Selling, general and administrative expenses,” of $4 million related PSU awards. The value of the PSU awards were adjusted to reflect the fair value of the relative TSR~~modifier.~~

4228

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

~~(17)~~

(14) Comprehensive Income (Loss):

Comprehensive income (loss) consists of net income (loss) and other gains and losses affecting equity (deficit) and pension/postretirement benefit (OPEB) liabilities that, under GAAP, are excluded from net loss.

In May and August of 2021, Frontier amended the medical coverage for certain postretirement benefit plans, which resulted in remeasurements of its other postretirement benefit obligation and prior service credits of $55 million and $2 million, respectively, which were deferred in “Accumulated comprehensive income” on our consolidated balance sheet as of September 30, 2021. Refer to Note 18 for further details.

The components of accumulated other comprehensive income (loss), net of tax, and changes are as follows:

Pension
OPEB
($ in millions)
Costs
Costs
Total
Balance at January 1, 2021 (Predecessor) ⁽¹⁾
$
(699)
$
(56)
$
(755)
Other comprehensive income (loss)
before reclassifications
270
74
344
Amounts reclassified from accumulated other
comprehensive loss to net loss
19
(4)
15
Net current-period other comprehensive
income (loss)
289
70
359
Cancellation of Predecessor equity
410
(14)
396
Balance at April 30, 2021 (Predecessor) ⁽¹⁾
$
-
$
-
$
-
Balance at April 30, 2021 (Successor) ⁽¹⁾
$
-
$
-
$
-
Other comprehensive income (loss)
before reclassifications
-
46
46
Amounts reclassified from accumulated other
comprehensive loss to net loss
-
(2)
(2)
Net current-period other comprehensive
income
-
44
44
Balance at September 30, 2021 (Successor) ⁽¹⁾
$
-
$
44
$
44
Pension
OPEB
($ in millions)
Costs
Costs
Total
Balance at January 1, 2020 (Predecessor) ⁽¹⁾
$
(684)
$
34
$
(650)
Other comprehensive income (loss)
before reclassifications
(389)
(16)
(405)
Amounts reclassified from accumulated other
comprehensive loss to net loss
233
(10)
223
Net current-period other comprehensive
loss
(156)
(26)
(182)
Balance at September 30, 2020 (Predecessor) ⁽¹⁾
$
(840)
$
8
$
(832)


	Pension		OPEB
($ in millions)	Costs		Costs		Total
Balance at January 1, 2022 (Successor) ⁽¹⁾	$	-	$	60	$	60
Other comprehensive income
before reclassifications		-		8		8
Amounts reclassified from accumulated other
comprehensive income to net income		-		(8)		(8)
Net current-period other comprehensive
income		-		-		-
Balance at September 30, 2022 (Successor) ⁽¹⁾	$	-	$	60	$	60


	Pension		OPEB
($ in millions)	Costs		Costs		Total
Balance at January 1, 2021 (Predecessor) ⁽¹⁾	$	(699)	$	(56)	$	(755)
Other comprehensive income
before reclassifications		270		74		344
Amounts reclassified from accumulated other
comprehensive loss to net income		19		(4)		15
Net current-period other comprehensive
income		289		70		359
Cancellation of Predecessor equity		410		(14)		396

Balance at April 30, 2021 (Predecessor) ⁽¹⁾	$	-	$	-	$	-


Balance at April 30, 2021 (Successor) ⁽¹⁾	$	-	$	-	$	-
Other comprehensive income
before reclassifications		-		46		46
Amounts reclassified from accumulated other
comprehensive income to net income		-		(2)		(2)
Net current-period other comprehensive
income		-		44		44
Balance at September 30, 2021 (Successor) ⁽¹⁾	$	-	$	44	$	44

⁽¹⁾Pension and OPEB amounts are net of tax of ~~$234 million and $204~~$15 million as of January 1, ~~2021~~2022 and ~~2020, respectively and $12~~$234 million as of January 1, 2021. The tax impact was $16 million and ~~$255~~$12 million as of September 30, 2022 and 2021, ~~and 2020,~~ respectively.

‎

4329

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

The significant items reclassified from components of accumulated other comprehensive loss are as follows:

Amount Reclassified from
Accumulated Other
Comprehensive Loss ⁽¹⁾
Successor
Predecessor
For the three months
For the three months
Affected Line Item in the
ended September 30,
ended September 30,
Statement Where Net
($ in millions)
2021
2020
Income (Loss) is presented
Amortization of Pension
Cost Items:
Actuarial losses
$
-
$
(29)
-
(29)
Loss before income taxes
Tax impact
-
4
Income tax benefit
$
-
$
(25)
Net income (loss)
Amortization of OPEB
Cost Items:
Prior-service costs
$
2
$
8
Actuarial losses
-
(1)
2
7
Income before income taxes
Tax impact
(1)
(2)
Income tax benefit
$
1
$
5
Net income (loss)
Amount Reclassified from
Accumulated Other
Comprehensive Loss ⁽¹⁾
Successor
Predecessor
For the five months
For the four months
For the nine months
Affected Line Item in the
ended September 30,
ended April 30,
ended September 30,
Statement Where Net
($ in millions)
2021
2021
2020
Income (Loss) is presented
Amortization of Pension
Cost Items
Actuarial losses
$
-
$
(24)
$
(76)
One-time loss on disposal
-
-
(61)
Pension settlement costs
-
-
(159)
-
(24)
(296)
Income (Loss) before income taxes
Tax impact
-
5
63
Income tax benefit
$
-
$
(19)
$
(233)
Net income (loss)
Amortization of OPEB
Cost Items
Prior-service costs
$
3
$
10
$
24
Actuarial losses
-
(5)
(4)
One-time loss on disposal
-
-
(7)
3
5
13
Income (Loss) before income taxes
Tax impact
(1)
(1)
(3)
Income tax benefit
$
2
$
4
$
10
Net income (loss)

Amount Reclassified from

Accumulated Other

Comprehensive Loss ⁽¹⁾

($ in millions)

Affected Line Item in

For the three months

the Statement Where

Details about Accumulated Other

ended September 30,

Net Income (Loss)

Comprehensive Loss Components

2022

2021

is Presented

Amortization of OPEB Cost Items

Prior-service costs

Income (Loss) before income taxes

Tax impact

(1)

Income tax benefit

Net income (loss)


	Successor				Predecessor
	Amount Reclassified from
	Accumulated Other
	Comprehensive Loss ⁽¹⁾
($ in millions)							Affected Line Item in
	For the nine months		For the five months		For the four months		the Statement Where
Details about Accumulated Other	ended September 30,		ended September 30,		ended April 30,		Net Income (Loss)
Comprehensive Loss Components	2022		2021		2021		is Presented
Amortization of Pension Cost Items Actuarial losses	$	-	$	-	$	(24)	Income (Loss) before income taxes
Tax impact		-		-		5	Income tax benefit
	$	-	$	-	$	(19)	Net income (loss)

Amortization of OPEB Cost Items
Prior-service costs	$	10	$	3	$	10
Actuarial losses		-		-		(5)
		10		3		5	Income (Loss) before income taxes
Tax impact		(2)		(1)		(1)	Income tax benefit
	$	8	$	2	$	4	Net income (loss)

⁽¹⁾ These accumulated other comprehensive loss components are included in the computation of net periodic pension and OPEB costs (See Note 1815 - Retirement Plans for additional details).

‎

4430

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

(~~18)~~15) Retirement Plans:

Frontier recognizes actuarial gains (losses) for our pension and postretirement plans in the period they occur. The components of net periodic benefit cost other than the service cost component for our plans as well as any actuarial gains or losses are included in “Investment and other income (loss)” on the consolidated statement of ~~operations.~~income.

The following tables provide the components of total pension benefit cost:

Successor
Predecessor
Pension
Pension
For the three months
For the three months
ended September 30,
ended September 30,
($ in millions)
2021
2020
Components of total pension benefit cost
Service cost
$
20
$
24
Interest cost on projected benefit obligation
26
26
Expected return on plan assets
(49)
(40)
Recognition of actuarial loss
-
29
Net periodic pension benefit cost
$
(3)
$
39
Successor
Predecessor
Pension
Pension
For the five months
For the four months
For the nine months
ended September 30,
ended April 30,
ended September 30,
($ in millions)
2021
2021
2020
Components of total pension benefit cost
Service cost
$
33
$
32
$
73
Interest cost on projected benefit obligation
44
31
84
Expected return on plan assets
(80)
(61)
(129)
Recognition of actuarial loss
-
24
76
Net periodic pension benefit cost
(3)
26
104
Pension settlement costs
-
-
159
Gain on disposal, net
-
-
(50)
Total pension benefit cost
$
(3)
$
26
$
213


	Pension Benefits
	For the three months ended September 30,		For the three months ended September 30,
($ in millions)	2022		2021

Components of total pension benefit cost
Service cost	$	14	$	20
Interest cost on projected benefit obligation		22		26
Expected return on plan assets		(46)		(49)
Amortization of unrecognized loss		-		-
Net periodic pension (benefit)		(10)		(3)
Pension settlement costs		50		-
Pension remeasurement gain		(91)		-
Total pension (benefit)	$	(51)	$	(3)


	Successor				Predecessor
	Pension Benefits
	For the nine months ended September 30,		For the five months ended September 30,		For the four months ended April 30,
($ in millions)	2022		2021		2021

Components of total pension benefit cost
Service cost	$	55	$	33	$	32
Interest cost on projected benefit obligation		71		44		31
Expected return on plan assets		(145)		(80)		(61)
Amortization of unrecognized loss		-		-		24
Net periodic pension (benefit) cost	$	(19)	$	(3)	$	26
Pension settlement costs		50		-		-
Pension remeasurement gain		(91)		-		-
Total pension (benefit) cost	$	(60)	$	(3)	$	26

~~PART I. FINANCIAL INFORMATION (Continued)~~

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

~~(Unaudited)~~

The components of net periodic benefit cost other than the service cost component are included in “Investment and other income” on the consolidated statement of ~~operations.~~

As part of fresh start accounting, Frontier revalued its net pension obligation as of April 30, 2021. In revaluating the pension benefit obligation, the assumed discount rate was 3.10% and the assumed rate of return on Plan assets was 7.5%. The discount rate increased compared to the 2.60% used in the December 31, 2020 valuation. This change as well as other changes in assumptions lead to a pension obligation decrease of $328 million.income.

The value of our pension plan assets ~~increased $79~~decreased $696 million from ~~$2,507~~$2,655 million at December 31, ~~2020~~2021 to ~~$2,586~~$1,959 million at ~~April~~September 30, ~~2021.~~2022. This ~~increase~~decrease primarily resulted from ~~contributions~~changes in the market value of ~~$32~~investments of $635 million including plan expenses, and ~~investment returns of $78 million, partially offset by~~ benefit payments to participants of ~~$25 million and plan expenses of $6 million.~~

The value of our pension plan assets increased $12 million from $2,586 million at April 30, 2021 to $2,598 million at September 30, 2021. This increase primarily resulted from investment returns of $68$233 million, partially offset by ~~benefit payments to participants~~contributions of ~~$51 million and plan expenses of $5~~$172 million.

The pension plan contains provisions that provide certain employees with the option of receiving a lump sum payment upon retirement. Frontier’s accounting policy is to record these payments as a settlement only if, in the aggregate, they exceed the sum of the annual service and interest costs for the Pension Plan’s net periodic pension benefit cost. During the nine months ended September 30, 2020, lump sum pension settlement payments to terminated or retired individuals amounted to $465 million, which exceeded the settlement threshold of $211 million, and as a result, Frontier recognized non-cash settlement charges totaling $159 million during the nine months ended September 30, 2020.

In 2020, we made $64 million in contributions to the pension plan. These represent the contributions for the 2019 plan year and reflect the fact that we received a pension funding waiver for all 2020 plan year contributions. The pension funding waiver was in the amount of $127 million and will be amortized over the next five years.

In 2021, we elected the provisions of American Rescue Plan Act, or ARPA retroactive to the 2019 plan year, which resulted in 1) a shortfall amortization period change from 7 to 15 years with a fresh start for the existing shortfall, commencing in the 2019 plan year and 2) interest rate stabilization, commencing in the 2020 plan year. These elections resulted in the creation of a funding balance that we used to satisfy certain required contributions in 2021. As a result of these changes, our pension plan contributions in the fiscal year 2021 are $42 million.

4631

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

pension benefit cost. During the nine months ended September 30, 2022, lump sum pension settlement payments to terminated or retired individuals amounted to $177 million, which exceeded the settlement threshold of $169 million, and as a result, Frontier recognized non-cash settlement charges totaling $50 million during the nine months ended September 30, 2022.

As a result of pension settlement charges incurred during the period, Frontier remeasured its pension plan obligations resulting in a remeasurement gain of $91 million for the nine months ended September 30, 2022. Upon emergence from bankruptcy, Frontier revised its accounting policy to recognize actuarial gains and losses in the period in which they occur. As such, this gain was recorded in “Investment and other income, net” on our consolidated statements of income.

In the first nine months of 2022, Frontier amended the medical coverage for certain postretirement benefit plans, which necessitated a remeasurement of its OPEB obligations. This remeasurement resulted in the recognition of a net actuarial gain of $234 million, which was driven primarily from a higher assumed discount rate relative to the previous measurement date. Upon emergence from bankruptcy, Frontier revised its accounting policy to recognize actuarial gains and losses in the period in which they occur. As such, this gain was recorded in “Investment and other income, net” on our consolidated statements of income.

The following tables provide the components of total postretirement benefit cost:

Successor
Predecessor
Postretirement
Postretirement
For the three months
For the three months
ended September 30,
ended September 30,
($ in millions)
2021
2020
Components of net periodic postretirement benefit cost
Service cost
$
4
$
5
Interest cost on projected benefit obligation
7
8
Amortization of prior service credit
(2)
(8)
Recognition of actuarial loss
54
1
Net periodic postretirement benefit cost
$
63
$
6
Successor
Predecessor
Postretirement
Postretirement
For the five months
For the four months
For the nine months
ended September 30,
ended April 30,
ended September 30,
($ in millions)
2021
2021
2020
Components of net periodic postretirement benefit cost
Service cost
$
7
$
7
$
15
Interest cost on projected benefit obligation
12
9
24
Amortization of prior service credit
(3)
(10)
(24)
Recognition of actuarial loss
67
5
4
Net periodic postretirement benefit cost
83
11
19
One-time gain on sale
-
-
(24)
Net periodic postretirement benefit cost
$
83
$
11
$
(5)


	Postretirement
	For the three months ended September 30,		For the three months ended September 30,
($ in millions)	2022		2021

Components of net periodic postretirement benefit cost
Service cost	$	3	$	4
Interest cost on projected benefit obligation		9		7
Amortization of prior service benefit		(4)		(2)
OPEB remeasurement (gain) loss		(84)		54
Total periodic postretirement (benefit) cost	$	(76)	$	63


	Successor				Predecessor
	Postretirement
	For the nine months ended September 30,		For the five months ended September 30,		For the four months ended April 30,
($ in millions)	2022		2021		2021

Components of net periodic postretirement benefit cost
Service cost	$	10	$	7	$	7
Interest cost on projected benefit obligation		23		12		9
Amortization of prior service benefit		(10)		(3)		(10)
OPEB remeasurement (gain) loss		(234)		67		-
Amortization of unrecognized loss		-		-		5
Net periodic postretirement (benefit) cost	$	(211)	$	83	$	11

~~As part~~During the nine months ended September 30, 2022, we capitalized $15 million of ~~fresh start accounting,~~pension and OPEB expense into the ~~Company remeasured its other postretirement benefit obligation~~cost of our capital expenditures, as the costs relate to our engineering and plant construction activities. During the four months of April 30, ~~2021. The assumed discount rate for this remeasurement increased from 2.60% to 3.30%, resulting in a reduction~~2021, we capitalized $7 million of ~~our postretirement benefit obligation of approximately $101 million. As such,~~pension and OPEB expense into the ~~postretirement benefit obligation was reduced from $1,042 million as of December 31, 2020, to $941 million as of April 30, 2021.~~

In May and August of 2021, Frontier amended the medical coverage for certain postretirement benefit plans, which resulted in remeasurements of its other postretirement benefit obligation and prior service credits of $55 million and $2 million, respectively, which were deferred in Accumulated comprehensive income as of September 30, 2021.cost

4732

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

The remeasurements resulted in decreases to the discount rate used to calculate the benefit obligation. The May remeasurement adjusted the discount rate from 3.30% to 3.20%, resulting in a remeasurement loss of approximately $13 million. The August remeasurement adjusted the discount rate from 3.20% to 2.80%, resulting in a remeasurement loss of approximately $54 million. As a result of fresh start accounting, Frontier updated its policy to recognize actuarial gains and losses in the period in which they occur. As such, these losses on remeasurement was recorded in Investment and other income, net on our consolidated statement of operations for the three and five months ended September 30, 2021.

~~During the four months of April 30, 2021, we capitalized $7 million of pension and OPEB expense into the cost~~ of our capital expenditures, as the costs relate to our engineering and plant construction activities. During the three and five months ended September 30, 2021, we capitalized $6 million and $10 million of pension and OPEB expense, respectively. During the three and nine months ended September 30, 2020, we capitalized $5 million and $18 million, respectively, of pension and OPEB expense into the cost of our capital expenditures, as the costs relate to our engineering and plant construction activities.

~~(19)~~(16) Commitments and Contingencies:

Although from time to time we make short-term purchasing commitments to vendors with respect to capital expenditures, we generally do not enter into firm, written contracts for such activities. In connection with the accelerated fiber build, we have prioritized diversifying our vendor base and finalizing agreements with vendors for relevant labor and materials. Some of these agreements ~~will~~ have initial two-year terms with an option to extend for two years through 2025.

In 2015, Frontier accepted the FCC’s CAF Phase II offer, ~~in 25 states,~~ which ~~provides~~provided $313 million in annual support through ~~2020 (since extended to 2021) in return for the Company’s commitment~~2021, to make available 10 Mbps downstream/1 Mbps upstream broadband ~~available~~service to households ~~within~~across some of the ~~CAF II eligible areas.~~25 states where we operate. The ~~Company must complete the CAF II~~ deployment bydeadline was December 31, ~~2021. Thereafter,~~2021, and final review and audit of households is not complete. To the ~~FCC~~extent it is determined we did not enable the required number of households with 10 Mbps downstream/1 Mbps upstream broadband service or we were unable to satisfy other CAF Phase II requirements, Frontier will ~~review carriers’ CAF II program completion data.~~be required to return a portion of the funds previously received and may be subject to certain other requirements and obligations. We have accrued an amount for any potential shortfall in the household build commitment that we deem to be probable and reasonably estimated, and we do not expect that any potential penalties, if ultimately incurred, will be material.

On January 30, 2020, the FCC adopted an order establishing RDOF, a competitive reverse auction to provide support to serve high cost areas. Under the ~~Rural Digital Opportunity Fund (RDOF) program.~~ ~~The FCC held the~~FCCs RDOF Phase I auction, ~~from October 29, 2020 through November 25, 2020 and announced the results on December 7, 2020.~~ Frontier was awarded approximately $371 million over ten years to build ~~gigabit capable~~gigabit-capable broadband over a fiber-to-the-premises network to approximately 127,000 locations in 8eight states (California, Connecticut, Florida, Illinois, New York, Pennsylvania, Texas, and West Virginia). Frontier ~~submitted its Long Form application to~~began receiving RDOF funding in the ~~FCC on January 29, 2021~~second quarter of 2022 and ~~assuming the long-form application is granted by the FCC, anticipates that it will begin receiving funding on January 1, 2022, in which case, Frontier~~we will be required to complete the buildout to ~~these~~the awarded locations by December 31, ~~2027,~~2028, with interim target milestones over this period.~~Beginning in 2022, Frontier will be required to issue letters of credit to the FCC as a condition for amounts awarded.~~ After the FCC updates its maps with more granular broadband availability information, the FCC plans to hold a second auction (RDOF Phase II) for any remaining locations with the remaining funding, up to approximately $11.2 billion.

On April 30, 2018, an amended consolidated class action complaint was filed in the United States District Court for the District of Connecticut on behalf of certain purported stockholders against Frontier, certain of its current and former directors and officers and the underwriters of certain Frontier securities offerings and in connection with certain disclosures relating to the CTF transaction. The complaint was brought on behalf of all persons who (1) acquired Frontier common stock between February 6, 2015 and February 28, 2018, inclusive, and/or (2) acquired Frontier common stock or Mandatory Convertible Preferred Stock. On March 8, 2019, the District Court granted in its entirety Frontier’s motion to dismiss the complaint and on March 24, 2020, the court denied plaintiffs’ motion for leave to amend. Plaintiffs appealed and prior to oral argument, the parties reached an agreement in principle to resolve the matter. The settlement, which will require court

~~PART I. FINANCIAL INFORMATION (Continued)~~

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

~~(Unaudited)~~

~~approval~~On July 27, 2022, the Connecticut Public Utility Regulatory Authority (“PURA”) issued a Notice of Violation and ~~will be covered~~Assessment of Civil Penalty Order to Cease and Desist (“NOV”) related to the underground excavation and placement of fiber facilities by ~~insurance, will have no material financial impact on the Company. In addition, shareholders filed derivative complaints on behalf of~~Frontier and its contractors in Connecticut. The NOV alleged that Frontier and its contractors failed to comply with certain state excavation regulations which created public safety and compliance issues. The NOV prescribed a fine and ordered Frontier to discontinue certain underground fiber deployment work until the Company submitted a compliance plan to ensure compliance with the applicable regulations. Frontier submitted a compliance and inspection plan consistent with the NOV and paid the fine. On August 26, 2022, PURA approved Frontier’s compliance and inspection plan, and the Company is proceeding with underground fiber deployment in Connecticut, California, and Delaware courts. The derivative complaints are based, generally, on the same facts asserted in the consolidated class action complaint. Frontier believes the derivative complaints are meritless and does not expect those cases will have a material financial impact on the Company.Connecticut.

In addition, we are party to various legal proceedings (including individual actions, class and putative class actions, and governmental investigations) arising in the normal course of our business covering a wide range of matters and types of claims including, but not limited to, general contract disputes, billing disputes, rights of access, taxes and surcharges, consumer protection, advertising, sales and the provision of services, intellectual property, including, trademark, copyright, and patent infringement, employment, regulatory, tort, claims of competitors and disputes with other carriers. Litigation is subject to uncertainty and the outcome of individual matters is not predictable. However, we believe that the ultimate resolution of all such matters, after considering insurance coverage or other indemnities to which we are entitled, will not have a material adverse effect on our financial position, results of operations, or cash flows.

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

In October 2013, the California Attorney General’s Office notified certain Verizon companies, including one of the subsidiaries that we acquired in the CTF Acquisition, of potential violations of California state hazardous waste statutes primarily arising from the disposal of electronic components, batteries and aerosol cans at certain California facilities. We are cooperating with this investigation. We have accrued an amount for potential penalties that we deem to be probable and reasonably estimated, and we do not expect that any potential penalties, if ultimately incurred, will be ~~material in comparison to the established accrual.~~material.

We accrue an expense for pending litigation when we determine that an unfavorable outcome is probable, and the amount of the loss can be reasonably estimated. Legal defense costs are expensed as incurred. None of our existing accruals for pending matters, after considering insurance coverage, is material. We monitor our pending litigation for the purpose of adjusting our accruals and revising our disclosures accordingly, when required. Litigation is, however, subject to uncertainty, and the outcome of any particular matter is not predictable. We will vigorously defend our interests in pending litigation, and as of this date, we believe that the ultimate resolution of all such matters, after considering insurance coverage or other indemnities to which we are entitled, will not have a material adverse effect on our consolidated financial position, results of operations, or our cash flows.

As part of the sale of the Northwest Operations, Frontier agreed to indemnify the purchaser for certain customary post-closing matters, including, among other things, breaches of certain covenants, agreements and warranties included in the purchase agreement for a period of one year after the closing date. As of September 30, 2021, all proceeds previously held in escrow related to such indemnification obligations, employee liabilities, and adjustments to working capital have been received by the Company.

We conduct certain of our operations in leased premises and also lease certain equipment and other assets pursuant to operating leases. The lease arrangements have terms ranging from 1 to 99 years and several contain rent escalation clauses providing for increases in monthly rent at specific intervals. When rent escalation clauses exist, we record annual rental expense based on the total expected rent payments on a straight-line basis over the lease term. Certain leases also have renewal options. Renewal options that are reasonably assured are included in determining the lease term.

We are party to contracts with several unrelated long-distance carriers. The contracts provide fees based on traffic they carry for us subject to minimum monthly fees.

‎

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FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains "forward-looking statements" related to future events. Forward-looking statements address our expectations or beliefs concerning future events, including, without limitation, our future operating and financial performance, our ability to comply with the covenants in the agreements governing our indebtedness and other matters. These statements are made on the basis of management’s views and assumptions, as of the time the statements are made, regarding future events and performance 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. We do not intend, nor do we undertake any duty, to update any forward-looking statements.

A wide range of factors could materially affect future developments and performance, including but not limited to:

our significant indebtedness, our ability to incur substantially more debt in the future, and covenants in the agreements governing our ~~current~~ indebtedness that may reduce our operating and financial flexibility;

declines in Adjusted EBITDA relative to historical levels that we are unable to ~~offset through potential EBITDA enhancements;~~offset;

our ability to successfully implement strategic initiatives, including our fiber buildout and other initiatives to enhance revenue and realize productivity improvements;

our ability to secure necessary construction resources, materials and permits for our fiber buildout ~~initiative;~~initiative in a timely and cost-effective manner;

potential disruptions in our supply chain and the effects of inflation resulting from the COVID-19 pandemic, the global microchip shortage, or otherwise, which could adversely impact our business and hinder our fiber expansion plans;

our ability to effectively manage our operations, operating expenses, capital expenditures, debt service

requirement and cash paid for income taxes and liquidity;

competition from cable, wireless and wireline carriers, satellite, fiber “overbuilders” and over the top 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;

risks related to disruption in our networks, infrastructure and information technology that 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;

our ability to retain or attract new customers and to maintain relationships with customers, including wholesale customers;

our reliance on a limited number of key supplies and vendors;

declines in revenue from our voice services, switched and nonswitched access and video and data services that we cannot stabilize or offset with increases in revenue from other products and services;

~~our ability to secure, continue to use or renew intellectual property and other licenses used in our business;~~

~~our ability to hire or retain key personnel;~~

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FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

our ability to secure, continue to use or renew intellectual property and other licenses used in our business;

our ability to hire or retain key personnel;

our ability to dispose of certain assets or asset groups or to make acquisition of certain assets on terms that are attractive to us, or at all;

the effects of changes in the availability of federal and state universal service funding or other subsidies to us and our competitors and our ability to obtain future subsidies;

our ability to meet our CAF II and RDOF obligations and the risk of penalties or obligations to return certain CAF II and RDOF funds;

our ability to defend against litigation and potentially unfavorable results from current pending and future litigation;

our ability to comply with applicable federal and state consumer protection requirements;

the effects of governmental legislation and regulation on our business, including costs, disruptions, possible limitations on operating flexibility and changes to the competitive landscape resulting from such legislation or regulation;

the impact of regulatory, investigative and legal proceedings and legal compliance risks;

our ability to effectively manage service quality in the states in which we operate and meet mandated service quality metrics;

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 our competitors more than us, as well as potential future decreases in the value of our deferred tax assets;

the effects of changes in accounting policies or practices;

our ability to successfully renegotiate union contracts;

the effects of increased medical expenses and pension and postemployment expenses;

changes in pension plan assumptions, interest rates, discount rates, regulatory rules and/or the value of our pension plan assets;

the likelihood that our historical financial information may no longer be indicative of our future performance; ~~and our implementation of fresh start accounting;~~

the impact of adverse changes in economic, political and market conditions in the areas that we serve, the U.S. and globally, including but not limited to, disruption in our supply chain, inflation in pricing for key materials or labor, increased fuel and electricity costs, the cost of borrowing, or other adverse changes resulting from epidemics, pandemics and outbreaks of contagious diseases, including the COVID-19 pandemic, natural disasters, economic or political instability or other adverse public health developments;

·potential adverse impacts of the COVID-19 pandemic on our business and operations, including potential disruptions to the work of our employees arising from health and safety measures such as social distancing, working remotely and recent applicable federal, ~~vaccine~~state and local mandates and prohibitions, our ability to effectively manage increased demand on our network, our ability to maintain relationships with our current or prospective customers and vendors and the ability of our vendors to perform under current or proposed arrangements with us, including impacts of potential stress on our supply chain;

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FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

effectively manage increased demand on our network, our ability to maintain relationships with our current or prospective customers and vendors and the ability of our vendors to perform under current or proposed arrangements with us;

~~risks associated with our emergence from the Chapter 11 Cases, including, but not limited to: the continuing effects~~potential adverse impacts of ~~the Chapter 11 Cases on us~~climate change and ~~our relationships with our suppliers, customers, service providers or employees~~increasingly stringent environmental laws, rules and ~~changes in the composition of our board of directors~~regulations, and ~~senior management;~~customer expectations;

~~volatility in the trading price of our common stock, which has a limited trading history;~~

~~substantial~~ market overhang from the substantial common stock ~~issued in the Reorganization;~~holdings by our former creditors;

certain provisions of Delaware law and our certificate of incorporation that may prevent efforts by our stockholders to change the direction or management of our company; and

certain other factors set forth in our other filings with the SEC.

~~This list~~Any of ~~factors that may affect future performance and~~ the ~~accuracy of~~foregoing events, or other events, could cause our results to vary from management’s forward-looking statements ~~is illustrative and is not intended to be exhaustive.~~included in this report. You should consider these important factors, as well as the risks ~~described~~contained in ~~this report on~~our most recent Form ~~10-Q~~10-K and other filings with the SEC, ~~including the risk factors included in Item 1A of our quarterly report on Form 10-Q for the quarter ended June 30, 2021,~~ in evaluating any statement in this report or otherwise made by us or on our behalf. We have no obligation to update or revise these forward-looking statements and do not undertake to do so.

Investors should also be aware that while we do, at various times, communicate with securities analysts, it is against our policy to disclose to them selectively any material non-public information or other confidential information. Accordingly, investors should not assume that we agree with any statement or report issued by an analyst, irrespective of the content of the statement or report. To the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not our responsibility.

‎

~~PART I. FINANCIAL INFORMATION (Continued)~~

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

~~(Unaudited)~~

~~Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

~~Description of our Business~~

Frontier Communications offers a variety of services to residential and business customers over its fiber-optic and copper networks in 25 states, including high-speed Internet, video, advanced voice, and Frontier Secure® digital protection solutions. Frontier Business™ offers communications solutions to small, medium, and enterprise businesses.

~~Overview~~

On April 30, 2021, we emerged from bankruptcy with a restructured balance sheet, a new management team, and a new purpose to Build Gigabit America by upgrading our copper network to fiber to meet the rapidly increasing demand for data from both our consumer and business customers. We believe that fiber-optic service has competitive advantages to be able to meet this growing demand, including faster download speeds, faster upload speeds, and lower latency levels than alternative broadband services.

On August 5, 2021, we announced our plan to accelerate our fiber build to reach 4 million fiber passings by December 31, 2021, and 10 million total fiber passings by December 31, 2025. We are prioritizing these build outs to target projects which we estimate will provide the highest investment returns. Over time, we expect our business mix will shift significantly, with a larger percentage of revenue coming from fiber as we implement our expansion plan.

~~Our strategy focuses on four levers of value creation: fiber deployment, fiber broadband penetration, operational efficiency, and improving the customer experience.~~

We built fiber to approximately 185,000 locations during the third quarter of 2021, resulting in 3.8 million total locations passed with fiber as of September 30, 2021. Our build plan remains on track and we have solidified our fiber build supply chain with multi-year agreements with key labor and equipment partners.

~~We had a record quarter of 29,000 fiber broadband customer net additions.~~

~~We realized approximately $45 million of gross annualized cost savings and remain on track to deliver $250 million of gross annual cost savings by 2023~~

We made significant strides in order to improve our customer experience, through partnerships with Red Ventures for digital customer acquisition and recently announced that we’re teaming up with eero, an Amazon company, to offer the eero Pro 6 to new fiber-optic customers, delivering a fast, reliable whole-home Wi-Fi experience.

On October 13, 2021, our consolidated subsidiary Frontier Communications Holdings, LLC (“FCH LLC” or the “Issuer”), issued $1.0 billion aggregate principal amount of 6.0% second lien secured notes due 2030 in an offering pursuant to exemptions from the registration requirements of the Securities Act of 1933 (the “Securities Act”). The Company intends to use the net proceeds of this offering to fund capital investments and operating costs arising from the Company’s fiber build and expansion of its fiber customer base, and for general corporate purposes. Giving effect to this offering, our liquidity as of September 30, 2021 would have been $2.7 billion.

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PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Frontier Communications Parent, Inc. is a provider of communications services in the United States, with approximately 2.8 million broadband customers and 14,746 employees, operating in 25 states as of September 30, 2022. We offer a broad portfolio of communications services for consumer and business customers. These services include data and Internet services, video services, voice services, access services, and advanced hardware and network solutions.

Business Overview

Frontier’s purpose is to Build Gigabit America^TM by expanding and transforming our fiber network in order to meet the rapidly increasing demand for data from both our consumer and business customers. We believe that a fiber network has competitive advantages to be able to meet this growing demand, including faster download speeds, faster upload speeds, and lower latency levels than alternative broadband services.

In August 2021, we announced our plan to accelerate our fiber build to reach 10 million total fiber passings by December 31, 2025. We are prioritizing our fiber build activities to locations which we believe will provide the highest investment returns. Over time, we expect our business mix will shift significantly, with a larger percentage of revenue coming from fiber as we implement our expansion plan.

Our strategy focuses on four levers of value creation: fiber deployment, fiber broadband penetration, improving the customer experience, and operational efficiency. We accomplished the following objectives in the third quarter of 2022:

We built fiber to approximately 351,000 locations, resulting in approximately 4.8 million total locations passed with fiber as of September 30, 2022.

We added 66,000 fiber broadband customer net additions, resulting in fiber broadband customer growth of 15.8% versus the third quarter of 2021.

oIn our Base Fiber Network of 3.2 million locations, we achieved broadband penetration of 42.9%, an increase of 140bps from the third quarter of 2021 and approaching our terminal penetration target of 45%.

oIn our Expansion Fiber markets, our target penetration is 15% - 20% after 12 months, 25% - 30% penetration after 24 months, and a terminal penetration of 45%. We have met or exceeded our targets for fiber locations constructed in 2020 and 2021:

Fiber locations constructed in 2020 reached broadband penetration of 22% and 42% after 12 and 24 months, respectively.

Fiber locations constructed in 2021 reached penetration of 17% after 12 months, which is within our target range of 15% - 20%.

Fiber broadband customer net additions continued to outpace copper broadband customer net losses, resulting in 4,000 total broadband customer net additions.

We realized $244 million of gross annualized cost savings as of September 30, 2022, achieving our 2023 target more than one year ahead of plan, and raised our target of gross annualized cost savings to $400 million by the end of 2024.

During the third quarter of 2022, markets remained volatile and the economic outlook remains uncertain. We continue to closely monitor market factors including potential disruptions in our supply chain, tightening labor markets, actual or perceived inflation, increased fuel and electricity costs, the cost of borrowing, and evolution of the ongoing COVID-19 pandemic. We continuously evaluate the impact these and other factors may have on our business, including demand for our products and services, our ability to execute on our strategic priorities and our financial condition

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

and results of operations. Through September 30, 2022 the overall operational and financial impacts to our business have not been material.

Financial Overview

We reported operating income of $169 million and $284 million for the three months ended September 30, 2022 and 2021, respectively, a decrease of $115 million.

We reported operating income of $456 million and Non-GAAP operating income of $841 million for the nine months ended September 30, 2022 and 2021, respectively, a decrease of $385 million. After adjusting for the impact of fresh start accounting, our Non-GAAP operating income would have decreased by $365 million, as compared to the prior year period.

Our operating results decreased primarily due to decreases in subsidy and other revenue, voice and video services and lease impairment charges, partially offset by a reduction in cost of services and depreciation and amortization expense as a result of the lower asset bases established upon our implementation of fresh start accounting and lower video content costs as compared to the corresponding periods in 2021.

Presentation of Results of Operations

The sections below include tables that present customer counts, average monthly consumer revenue per customer ~~(ARPC)~~(“ARPC”) and consumer customer churn. We define churn as the number of consumer customer deactivations during the month divided by the number of consumer customers at the beginning of the month and utilize the average of each monthly churn in the period. Management believes that consumer customer counts and average monthly revenue per customer are important factors in evaluating our consumer customer trends. Among the key services we provide to consumer customers are voice service, data service and video service. We continue to explore the potential to provide additional services to our customer base, with the objective of meeting our customers’ communications needs.

The following section should be read in conjunction with the unaudited interim consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. The following charts present key customer metrics, disaggregation of revenue, and the results of operations of the consolidated ~~company including~~company.

(a)Results of Operations

Unless otherwise indicated, the ~~Northwest Operations (Northwest Ops) through~~discussion of the ~~date~~customer metrics and components of ~~sale. The results of operations~~operating income for the ~~Northwest Operations are shown separate from~~table that follows relates only to the ~~total~~Non-GAAP financial results for ~~our operations located in~~ the ~~remaining 25 states (Remaining Properties).~~nine months ended September 30, 2022, as compared to the financial results for the nine months ended September 30, 2021.

‎

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FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

~~(a)Results of Operations~~

Unless otherwise indicated, the discussion of the customer metrics and components of operating income for the table that follows relates only to the Non-GAAP combined financial results for the three and nine months ended September 30, 2021 as compared to the financial results excluding the impact of the Northwest operations for the nine months ended September 30, 2020.

Customer ~~counts, ARPC, and Consumer Customer Churn~~Trends

As of or for the three months ended September 30,
(Customer, Subscriber, and Employee Metrics in thousands)
2021⁽²⁾
2020 ⁽³⁾
% Change
Customers ⁽⁴⁾
Consumer
3,173
3,306
(4)
%
Business ⁽¹⁾
304
332
(8)
%
Total
3,477
3,638
(4)
%
Consumer Customer Metrics ⁽⁴⁾
Net customer additions (losses)
(23)
(36)
(36)
%
ARPC
$
83.77
$
86.75
(3)
%
Customer Churn
1.64%
1.81%
(9)
%
Broadband Customer Metrics ^{(1) (4)}
Fiber Broadband
Consumer customers
1,292
1,229
5
%
Business customers
95
94
1
%
Consumer net customer additions
29
6
383
%
Consumer customer churn
1.56%
1.80%
(13)
%
Consumer customer ARPU
$
63.35
$
57.58
10
%
Copper Broadband
Consumer customers
1,264
1,381
(8)
%
Business customers
138
157
(12)
%
Consumer net customer additions
(33)
(20)
65
%
Consumer customer churn
1.89%
2.11%
(10)
%
Consumer customer ARPU
$
45.44
$
42.16
8
%
Other Metrics
Employees
15,803
16,302
(3)
%


	As of or for the three months ended September 30,
(Customer and Employee Metrics in thousands)	2022		2021		% Change
Customers
Consumer		3,142		3,173	(1)	%

Consumer Customer Metrics
Net customer additions (losses)		(17)		(23)	(26)	%
ARPC	$	83.05	$	83.77	(1)	%
Customer Churn		1.76%		1.64%	7	%

Broadband Customer Metrics ⁽¹⁾
Fiber Broadband
Consumer customers		1,502		1,292	16	%
Business customers		104		95	9	%
Consumer net customer additions		64		29	121	%
Consumer customer churn		1.60%		1.56%	3	%
Consumer customer ARPU	$	62.97	$	63.35	(1)	%
Copper Broadband
Consumer customers		1,105		1,264	(13)	%
Business customers		120		138	(13)	%
Consumer net customer additions (losses)		(58)		(33)	76	%
Consumer customer churn		2.02%		1.89%	7	%
Consumer customer ARPU	$	49.65	$	45.44	9	%

Other Metrics
Employees		14,746		15,803	(7)	%


		For the nine months ended September 30,
	(Customer and Employee Metrics in thousands)	2022		2021		% Change
	Consumer Customer Metrics
	Net customer additions (losses)		(23)		(92)	(75)	%
	ARPC	$	82.68	$	85.49	(3)	%
	Customer Churn		1.55%		1.54%	1	%

	Broadband Customer Metrics ⁽¹⁾
	Fiber Broadband
	Consumer net customer additions		166		54	207	%
	Consumer customer churn		1.41%		1.50%	(6)	%
	Consumer customer ARPU	$	62.84	$	62.38	1	%
	Copper Broadband
	Consumer net customer additions (losses)		(129)		(85)	52	%
	Consumer customer churn		1.76%		1.73%	2	%
	Consumer customer ARPU	$	47.93	$	44.47	8	%

⁽¹⁾	Amounts presented exclude related metrics for our wholesale customers.

‎

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FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

For the nine months ended September 30,
(Customer, Subscriber, and Employee Metrics in thousands)
2021⁽²⁾
2020 ⁽³⁾
% Change
Consumer Customer Metrics ⁽⁴⁾
Net customer additions (losses)
(92)
(107)
(14)
%
ARPC
$
85.49
$
87.50
(2)
%
Customer Churn
1.54%
1.76%
(13)
%
Broadband Customer Metrics ^{(1) (4)}
Fiber Broadband
Consumer net customer additions
54
24
125
%
Consumer customer churn
1.50%
1.75%
(14)
%
Consumer customer ARPU
$
62.38
$
57.14
9
%
Copper Broadband
Consumer net customer additions
(85)
(61)
39
%
Consumer customer churn
1.73%
2.17%
(20)
%
Consumer customer ARPU
$
44.47
$
41.74
7
%
⁽¹⁾
Amounts presented exclude related metrics for our wholesale customers
⁽²⁾
Amounts represent activity related to both the Predecessor and Successor company on a combined basis.
⁽³⁾
Amounts have been adjusted to exclude the impact of our Northwest Operations.
⁽⁴⁾
Due to changes in methodology during the second quarter of 2021, historical periods have been updated to reflect the comparable amounts.

Customers

We experienced a decrease in customers of approximately 1% as of September 30, 2022, as compared to the prior year period.

The average monthly consumer revenue per customer (“consumer ARPC”) decreased $0.72, or 1%, to $83.05 for the three months ended September 30, 2022, compared to the prior year period; and decreased $2.81, or 3%, to $82.68 for the nine months ended September 30, 2022, compared to the prior year period.

~~Fiber Customers~~The decrease for the quarter ended September 30, 2022, was primarily a result of decreased video services and consumer voice services, slightly offset by increased fiber data as well as price adjustments and promotional roll-offs on our voice, data and video services. The moderate decline in ARPC is expected to continue as our customer mix becomes more weighted towards broadband service. We have de-emphasized the sale of low margin video products, which have been a material part of the overall ARPC. In our expansion markets, we expect fiber broadband penetration of 15% and 20% within 12 months and 25% - 30% after 24 months.

~~The Company has~~

Fiber Broadband Customers

We have initiated an investment strategy focused on expanding and improving ~~its~~our fiber network. In conjunction with this strategy, ~~the Company is~~we are also working to improve ~~its~~our product positioning in both existing and new fiber markets.

Although still in the ~~initial~~early stages of this fiber investment strategy, results are ~~promising as~~promising. The quarter ended September 30, 2022 represents the thirteenth consecutive quarter of positive consumer fiber net adds. For the quarter ended September 30, ~~2021 represents~~2022, Frontier added 64,000 consumer fiber broadband customers compared to 29,000 for the ~~ninth consecutive quarter~~three months ended September 30, 2021. Customers who migrated from our copper base constituted a minor portion of ~~positive~~these consumer fiber broadband customer net ~~adds. Further, this strategy is accelerating our fiber growth as~~additions in the ~~quarterly positive net adds are improving both year over year and sequentially.~~nine months ended September 30, 2022.

For the three and nine months ended September 30, ~~2021,~~2022, Frontier added ~~29,000~~2,000 and ~~54,000 consumer~~8,000 business fiber broadband customers compared to ~~6,000 and 24,000~~zero net additions for both the three and nine months ended September 30, ~~2020. The positive growth in the quarter ended September 30, 2021 represents the ninth consecutive quarter of positive net adds.~~2021.

Our focus on expanding and improving our ~~state-of-the-art~~ fiber network is ~~resulting in improved~~contributing to healthy customer retention. Our average monthly consumer fiber broadband churn was ~~1.56% and 1.50%~~1.60% for the three ~~and nine~~ months ended September 30, ~~2021~~2022, compared to ~~1.80% and 1.75%~~1.56% for ~~three and nine months ended September 30, 2020. The improvements~~the prior year period. Improvements in customer churn ~~were also aided by~~due to increased focus ~~on customer retention~~ at key customer touchpoints such as installation, first bill, ~~and~~ end of promotion ~~periods.~~periods, and improved retention activities associated with inflation-related pricing actions, were offset by increases in involuntary related churn.

~~In addition to our sequential improvement in net add, we continue to see improvements in the~~The average monthly consumer fiber broadband revenue per customer ~~which increased $5.77 or 10%~~(“Consumer ARPU”) decreased $0.38 to ~~$63.35 and increased $5.24 or 9% to $62.38~~$62.97 for the three ~~and nine~~ months ended September 30, ~~2021~~2022, compared to the prior year period, ~~respectively. These~~as the positive impacts of price increases ~~are~~and customers adopting faster speed tiers were offset by the negative impacts of gift cards and auto-pay discounts. During the three months ended September 30, 2022 we had a greater degree of gift card issuances than we did in the prior year quarter. Gift cards had a negative impact to consumer fiber broadband ARPU of $1.66 for the three months ended September 30, 2022, as compared to $0.24 for the three months ended September 30, 2021.

Consumer ARPU increased $0.46 to $62.84 for the nine months ended September 30, 2022, compared to the prior year period, primarily due to ~~increased data equipment revenue~~price increases and shifting mix towards higher ~~speeds.~~speed tiers, a shift which has accelerated since the launch of our 2 gigabit offering on February 22, 2022. Gift cards had a negative impact to ARPU of $1.38 for the nine months ended September 30, 2022, as compared to $0.08 for the nine months ended September 30, 2021.

5641

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

Copper Broadband Customers

For the three ~~and nine~~ months ended September 30, ~~2021,~~2022, Frontier lost ~~33,000 and 85,000 of our~~58,000 consumer copper broadband customers compared to ~~20,000 and 61,000~~a loss of 33,000 for the three ~~and~~months ended September 30, 2021.

Consumer copper broadband customer losses were 129,000 for the nine months ended September 30, 2020. Our fiber investment strategy has impacted these results as new fiber markets will not only cease selling the copper broadband product, but we will focus on converting existing copper broadband customers2022, compared to a ~~fiber product.~~loss of 85,000 for the nine months ended September 30, 2021.

For the three ~~and nine~~ months ended September 30, ~~2021,~~2022, Frontier lost 4,000 ~~and 14,000 of our~~ business copper broadband customers compared to ~~7,000 and 20,000 for~~a loss of 4,000 in the three ~~and~~months ended September 30, 2021. Business copper broadband customers losses were 13,000 in the nine months ended September 30, ~~2020.~~2022, compared to a loss of 14,000 in the nine months ended September 30, 2021.

Our average monthly consumer ~~customer~~copper broadband churn was 1.64% and 1.54% for the three and nine months ended September 30, 2021 compared to 1.81% and 1.76% for three and nine months ended September 30, 2020. The reductions in customer churn were primarily driven by customer retention initiatives and also reflect the impact of COVID-19.

~~Consumer and Business Customers~~

~~During the three and nine months ended September 30, 2021 we experienced a reduction in total customers of approximately 1% and 5%, respectively.~~

The average monthly consumer revenue per customer (consumer ARPC) decreased $2.98 to $83.77 and decreased $2.01 to $85.49 for the three and nine months ended September 30, 2021 compared to the prior year periods, respectively. After adjusting for the fresh start impact of approximately $1.81 and $1.23 for the three and nine month periods, respectively, consumer ARPC decreased by $1.17 and $0.78, respectively.

The decrease for the three and nine months ended September 30, 2021 was primarily a result of decreased video services along with decreased consumer voice services, slightly offset by increased fiber data and data equipment revenues. This ARPC trend is expected to continue as our customer mix becomes more predominantly broadband. We have de-emphasized the sale of low margin video products which have been a material part of the overall ARPC.

~~Financial Results~~

~~We reported operating income of $284 million and $270 million~~2.02% for the three months ended September 30, 2021 and 2020, respectively. Fresh start accounting decreased operating income by $23 million for the third quarter of 2021. After adjusting for the impact of fresh start accounting, our operating income for2022, compared to 1.89% in the three months ended September 30, ~~2021 would have increased by $37 million. The improvement in our operating results~~2021. Consumer copper broadband churn was primarily due to a reduction in depreciation and amortization expense as a result of the lower asset bases established upon our implementation of fresh start accounting and lower video content costs as compared to the corresponding period in 2020.

We reported operating income of $490 million and $351 million for the five months ended September 30, 2021 and the four months ended April 30, 2021, respectively. While the basis of accounting for the predecessor and successor are different as a result of applying fresh start accounting, for purposes of discussing our year to date operating performance that follows we have presented combined Non-GAAP operating income1.76% for the nine months ended September 30, ~~2021 which will be~~2022, compared to ~~operating income for~~1.73% in the nine months ended September 30, ~~2020 for~~2021. The increase in consumer copper broadband churn was driven by the ~~Remaining Properties. The more significant impacts~~impact of ~~fresh start accounting that affect comparability are included~~copper to fiber migration activities in newly built fiber areas, the ~~variance analysis that follows.~~rationalization of our copper acquisition strategy, and adverse weather.

We reported Non-GAAP operating income of $841 million and operating income of $682 million for the nine months ended September 30, 2021 and 2020, respectively, an increase of $159 million. Fresh start accounting decreased operating income by $38 million for the first three quarters of 2021. After adjusting for the impact of fresh start accounting, our non-GAAP operating income would have increased by $197 million. The improvement in our operating results was primarily due to reductions in depreciation and amortization expense, loss on disposal, and

‎

5742

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

~~decreased video content costs primarily related to the declines in video customers due to the Company de-emphasizing our less profitable video offerings.~~

Financial Results


	For the three months ended September 30,		For the three months ended September 30,
	2022		2021		% Change
Data and Internet services	$	848	$	834	2	%
Voice services		369		411	(10)	%
Video services		127		149	(15)	%
Other		82		99	(17)	%
Revenue from contracts with customers		1,426		1,493	(4)	%
Subsidy and other revenue		18		83	(78)	%
Revenue		1,444		1,576	(8)	%

Operating expenses:
Cost of Service		544		590	(8)	%
Selling, general, and administrative expenses		431		421	2	%
Depreciation and amortization		296		273	8	%
Restructuring costs and other charges		4		8	(50)	%
Total operating expenses	$	1,275	$	1,292	(1)	%

Operating income		169		284	(40)	%

Consumer		785		800	(2)	%
Business and wholesale		641		693	(8)	%
Revenue from contracts with customers	$	1,426	$	1,493	(4)	%

Fiber revenue		691		684	1	%
Copper revenue		735		809	(9)	%
Revenue from contracts with customers	$	1,426	$	1,493	(4)	%

‎

5843

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

Successor
Predecessor
For the three
For the three months ended September 30, 2020
months ended
Consolidated
Northwest
Remaining
($ in millions)
September 30, 2021
Frontier
Ops ⁽¹⁾
Properties
Data and Internet services
$
834
$
838
$
-
$
838
Voice services
411
500
-
500
Video services
149
186
-
186
Other
99
103
-
103
Revenue from contracts
with customers
1,493
1,627
-
1,627
Subsidy and other revenue
83
99
-
99
Revenue
1,576
1,726
-
1,726
Operating expenses ⁽²⁾:
Network access
expenses
177
226
-
226
Network related
expenses
413
431
-
431
Selling, general and
administrative
expenses
421
404
-
404
Depreciation and
amortization
273
392
-
392
Restructuring costs and
other charges
8
3
-
3
Total operating expenses
$
1,292
$
1,456
$
-
$
1,456
Operating income
284
270
-
270
Consumer ⁽³⁾
800
865
-
865
Business and wholesale ⁽³⁾
693
762
-
762
Revenue from contracts
with customers
1,493
1,627
-
1,627
Subsidy and other revenue
83
99
-
99
Total revenue
$
1,576
$
1,726
$
-
$
1,726

⁽¹⁾~~Amounts represent the financial results of the Northwest Operations for the three months ended September 30, 2020.~~

⁽²⁾~~Operating expenses for the Northwest Operations do not include allocated expenses which are included in operating expenses for our Remaining Properties.~~

⁽³⁾~~Due to changes in methodology during the second quarter of 2021, historical periods have been updated to reflect the comparable amounts.~~


	Successor				Predecessor		Non-GAAP Combined
	For the nine months ended September 30,		For the five months ended September 30,		For the four months ended April 30,		For the nine months ended September 30,
	2022		2021		2021		2021		% Change
Data and Internet services	$	2,531	$	1,390	$	1,125	$	2,515	1	%
Voice services		1,136		694		647		1,341	(15)	%
Video services		398		254		223		477	(17)	%
Other		245		161		125		286	(14)	%
Revenue from contracts with customers		4,310		2,499		2,120		4,619	(7)	%
Subsidy and other revenue		40		138		111		249	(84)	%
Revenue		4,350		2,637		2,231		4,868	(11)	%

Operating expenses:
Cost of Service		1,643		986		830		1,816	(10)	%
Selling, general, and administrative expenses		1,293		690		537		1,227	5	%
Depreciation and amortization		870		452		506		958	(9)	%
Restructuring costs and other charges		88		19		7		26	238	%
Total operating expenses	$	3,894	$	2,147	$	1,880	$	4,027	(3)	%

Operating income		456		490		351		841	(46)	%

Consumer		2,352		1,343		1,133		2,476	(5)	%
Business and wholesale		1,958		1,156		987		2,143	(9)	%
Revenue from contracts with customers	$	4,310	$	2,499	$	2,120	$	4,619	(7)	%

Fiber revenue		2,048		1,139		903		2,042	0	%
Copper revenue		2,262		1,360		1,140		2,500	(10)	%
Non-network specific revenue		-		-		77		77	(100)	%
Revenue from contracts with customers	$	4,310	$	2,499	$	2,120	$	4,619	(7)	%

‎

~~PART I. FINANCIAL INFORMATION (Continued)~~

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

~~(Unaudited)~~

Non-GAAP
Successor
Predecessor
Combined
Predecessor
For the five
For the four
For the nine
For the nine months ended September 30, 2020
months ended
months ended
months ended
Consolidated
Northwest
Remaining
($ in millions)
September 30, 2021
April 30, 2021
September 30, 2021
Frontier
Ops ⁽¹⁾
Properties
Data and Internet services
$
1,390
$
1,125
$
2,515
$
2,644
$
102
$
2,542
Voice services
694
647
1,341
1,595
57
1,538
Video services
254
223
477
608
13
595
Other
161
125
286
328
12
316
Revenue from contracts
with customers
2,499
2,120
4,619
5,175
184
4,991
Subsidy and other revenue
138
111
249
285
8
277
Revenue
2,637
2,231
4,868
5,460
192
5,268
Operating expenses ⁽²⁾:
Network access
expenses
304
264
568
767
14
753
Network related
expenses
682
566
1,248
1,305
26
1,279
Selling, general and
administrative
expenses
690
537
1,227
1,255
26
1,229
Depreciation and
amortization
452
506
958
1,204
-
1,204
Loss on disposal of
Northwest Operations
-
-
-
160
-
160
Restructuring costs
and other charges
19
7
26
87
-
87
Total operating expenses
$
2,147
$
1,880
$
4,027
$
4,778
$
66
$
4,712
Operating income
490
351
841
682
126
556
Consumer ⁽³⁾
1,343
1,133
2,476
2,746
102
2,644
Business and
wholesale ⁽³⁾
1,156
987
2,143
2,429
82
2,347
Revenue from contracts
with customers
2,499
2,120
4,619
5,175
184
4,991
Subsidy and other
revenue
138
111
249
285
8
277
Total revenue
$
2,637
$
2,231
$
4,868
$
5,460
$
192
$
5,268

⁽¹⁾~~Amounts represent the financial results of the Northwest Operations for the nine months ended September 30, 2020.~~

⁽²⁾~~Operating expenses for the Northwest Operations do not include allocated expenses which are included in operating expenses for our Remaining Properties.~~

⁽³⁾~~Due to changes in methodology during the second quarter of 2021, historical periods have been updated to reflect the comparable amounts.~~

6044

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

REVENUE

The table below presents our revenue by technology for the periods indicated:


	Successor
	For the three months		For the three months
	ended September 30,		ended September 30,		$ Increase		% Increase
($ in millions)	2022		2021		(Decrease)		(Decrease)
Fiber	$	691	$	684	$	7	1	%
Copper		735		809		(74)	(9)	%
Revenue from contracts with customers ⁽¹⁾		1,426		1,493		(67)	(4)	%
Subsidy revenue		18		83		(65)	(78)	%
Total revenue	$	1,444	$	1,576	$	(132)	(8)	%


	Successor		Non-GAAP Combined
	For the nine months		For the nine months
	ended September 30,		ended September 30,		$ Increase		% Increase
($ in millions)	2022		2021		(Decrease)		(Decrease)
Fiber	$	2,048	$	2,042	$	6	0	%
Copper		2,262		2,500		(238)	(10)	%
Other ⁽²⁾		-		77		(77)	(100)	%
Revenue from contracts with customers ⁽¹⁾		4,310		4,619		(309)	(7)	%
Subsidy revenue		40		249		(209)	(84)	%
Total revenue	$	4,350	$	4,868	$	(518)	(11)	%

⁽¹⁾Includes lease revenue of $15 million and $16 million for the three months ended September 30, 2022 and 2021, respectively. Lease revenue was $48 million and $47 million for the nine months ended September 30, 2022 and 2021, respectively.

⁽²⁾Includes USF fees that, in conjunction with the application of fresh start accounting, are now recorded net.

Our revenue streams are primarily generated by recurring data, voice, and video services delivered over either our copper or fiber network. Revenues are considered copper or fiber based on the “last-mile” technology used to connect the customer location. With our investment strategy to expand and improve our fiber network and the corresponding fiber focus of our sales and marketing efforts, we are experiencing growth in fiber broadband revenue and a decline in copper revenue. We expect this trend to continue due to strong fiber demand and the migration of customers from copper to fiber once the fiber network is available.

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

Revenue for our consumer and business and wholesale customers was as follows:

Successor
Predecessor
For the three
For the three
months ended
months ended
$ Increase
% Increase
($ in millions)
September 30, 2021
September 30, 2020
(Decrease)
(Decrease)
Consumer ⁽²⁾
$
800
$
865
$
(65)
(8)
%
Business and wholesale ⁽²⁾
693
762
(69)
(9)
%
Revenue from contracts with customers ⁽¹⁾
1,493
1,627
(134)
(8)
%
Subsidy and other revenue
83
99
(16)
(16)
%
Total revenue
$
1,576
$
1,726
$
(150)
(9)
%
Non-GAAP
Combined
Predecessor
For the nine
For the nine
months ended
months ended
$ Increase
% Increase
($ in millions)
September 30, 2021
September 30, 2020
(Decrease)
(Decrease)
Consumer ⁽²⁾
$
2,476
$
2,644
$
(168)
(6)
%
Business and wholesale ⁽²⁾
2,143
2,347
(204)
(9)
%
Revenue from contracts with customers ⁽¹⁾
4,619
4,991
(372)
(7)
%
Subsidy and other revenue
249
277
(28)
(10)
%
Total revenue
$
4,868
$
5,268
$
(400)
(8)
%


	Successor
	For the three months ended September 30,		For the three months ended September 30,		$ Increase		% Increase
($ in millions)	2022		2021		(Decrease)		(Decrease)
Consumer	$	785	$	800	$	(15)	(2)	%
Business and wholesale		641		693		(52)	(8)	%
Revenue from contracts with customers ⁽¹⁾		1,426		1,493		(67)	(4)	%
Subsidy and other revenue		18		83		(65)	(78)	%
Total revenue	$	1,444	$	1,576	$	(132)	(8)	%

	Successor		Non-GAAP Combined
	For the nine months ended September 30,		For the nine months ended September 30,		$ Increase		% Increase
($ in millions)	2022		2021		(Decrease)		(Decrease)
Consumer	$	2,352	$	2,476	$	(124)	(5)	%
Business and wholesale		1,958		2,143		(185)	(9)	%
Revenue from contracts with customers ⁽¹⁾		4,310		4,619		(309)	(7)	%
Subsidy and other revenue		40		249		(209)	(84)	%
Total revenue	$	4,350	$	4,868	$	(518)	(11)	%

⁽¹⁾~~Lease~~Includes lease revenue ~~for the successor company~~of $15 million and $16 million for the three months ended September 30, 2022 and 2021, respectively. Lease revenue was $48 million and $47 million for the nine months ended September 30, 2022 and 2021, ~~was $16 million and $47 million,~~ respectively. ~~Lease revenue for the predecessor company for the three and nine months ended September 30, 2020 was $16 million and $50 million, respectively.~~

⁽²⁾~~Due to changes in methodology during the third quarter of 2021, historical periods have been updated to reflect the comparable amounts.~~

We conduct business with a range of consumer, business and wholesale customers and we generate both recurring and non-recurring revenues. Recurring revenues are primarily billed at fixed recurring rates, with some services billed based on usage. Revenue recognition is not dependent upon significant judgments by management, with the exception of a determination of the provision for expected credit losses.

~~Consumer~~
‎

Consumer customer losses were driven by reductions in our copper broadband and stand-alone voice customers, offset by net additions of fiber broadband customers. Customer preferences as well as our fiber investment initiative is resulting in a migration of the customer base to fiber.

For the three and nine months ended September 30, 2021, Frontier lost 23,000 and 92,000 of our consumer customers compared to 36,000 and 107,000 for the three and nine months ended September 30, 2020. This includes net losses of our consumer broadband customers of approximately 4,000 and 14,000 during those same periods. These improvements are a direct result of our fiber initiatives.

For the three and nine months ended September 30, 2021, we experienced 8% and 6% declines in consumer revenues, respectively. These declines were driven by a 4% decrease in the number of customers and a 3% and 2% decrease in ARPC, respectively. This decline was driven predominantly by decreases in voice, video and copper

6146

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

Consumer

Consumer customer losses were driven by reductions in our copper broadband and stand-alone voice customers, partially offset by net additions of fiber broadband customers. Customer preferences as well as our fiber investment initiative are resulting in a migration of our customer base to fiber.

We lost 17,000 and 23,000 consumer customers in the three months ended September 30, 2022 and 2021.

We lost 23,000 and 92,000 consumer customers in the nine months ended September 30, 2022 and 2021.

Our loss in 2022 includes net gains of consumer broadband customers of 6,000 and 37,000 for the three and nine months ended September 30, 2022.

Our improvement in consumer broadband customers is a direct result of our fiber initiatives.

For the three and nine months ended September 30, 2022, compared to the three and nine months ended September 30, 2021:

We experienced 2% decline in consumer revenues for the three months ended September 30, 2022, driven by a 1% decrease in ARPC, as compared to the three months ended September 30, 2021. For the nine months ended September 30, 2022, consumer revenues declined 5% driven by a 3% decrease in ARPC and 1% decline in the number of customers as compared to the same period in 2021. This decline was driven predominantly as a result of decreases in voice, video and copper broadband, offset by increases in fiber broadband. The Company’s fiber initiative will result in our revenue mix continuing to move to fiber broadband.

~~For~~We experienced 14% and 13% improvement in consumer fiber broadband revenues for the three and nine months ended September 30, ~~2021, we experienced 15% and 13% improvements in consumer fiber broadband revenues. These improvements are~~2022, respectively. This improvement is a result of our fiber initiative which resulted in net adds of ~~29,000 and 54,000~~210,000 customers during the twelve month period, and our continued focus on product positioning in both new and existing markets which resulted in ARPU ~~improvements~~decline of ~~$5.77~~$0.38 and ~~$5.24~~improvement of $0.46 for the three and nine months ended September 30, ~~2021 respectively.~~

~~For both~~2022 compared to the three and nine months ended September 30, ~~2021, we~~2021. ARPU for both periods of 2022 were impacted by credits issued to incentivize customers to auto-pay bills and by the issuance of gift cards as part of our acquisition offers.

We experienced approximately ~~1% declines~~3% and 3% decline in consumer copper broadband revenues ~~respectively.~~for the three and nine months ended September 30, 2022. As our copper footprint is transitioned to fiber, we expect fewer copper sales opportunities, and will proactively migrate existing broadband customers from copper to fiber, both of which will reduce our copper net adds.

Business

For the three and nine months ended September 30, ~~2021,~~2022, we experienced aan 8% and 9% decline in our business and wholesale revenues, respectively. Business revenues declined primarily due to the secular pressures in ~~both periods. Of these declines, wholesale~~copper voice revenue as well as the loss of equipment revenue associated with the sale of our equipment subsidiary. Wholesale revenues ~~decreased by 16%~~declined primarily due to secular pressures in copper voice revenue, legacy circuit revenue, and ~~12%, driven by~~ lower rates for our network access services charged to our wholesale customers for the ~~three and~~ nine months ended September 30, ~~2021, respectively. Our small~~2022.

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

Revenue by product and ~~medium business~~service type was as follows:


	For the three months ended September 30,		For the three months ended September 30,		$ Increase		% Increase
($ in millions)	2022		2021		(Decrease)		(Decrease)
Data and Internet services	$	848	$	834	$	14	2	%
Voice services		369		411		(42)	(10)	%
Video services		127		149		(22)	(15)	%
Other		82		99		(17)	(17)	%
Revenue from contracts with customers ⁽¹⁾		1,426		1,493		(67)	(4)	%
Subsidy and other revenue		18		83		(65)	(78)	%
Total revenue	$	1,444	$	1,576	$	(132)	(8)	%

	Successor		Non-GAAP Combined
	For the nine months ended September 30,		For the nine months ended September 30,		$ Increase		% Increase
($ in millions)	2022		2021		(Decrease)		(Decrease)
Data and Internet services	$	2,531	$	2,515	$	16	1	%
Voice services		1,136		1,341		(205)	(15)	%
Video services		398		477		(79)	(17)	%
Other		245		286		(41)	(14)	%
Revenue from contracts with customers ⁽¹⁾		4,310		4,619		(309)	(7)	%
Subsidy and other revenue		40		249		(209)	(84)	%
Total revenue	$	4,350	$	4,868	$	(518)	(11)	%

⁽¹⁾Includes lease revenue of $15 million and ~~larger enterprise (SME) revenues decreased 2% and 5% primarily as a result of a decline in small business customers~~$16 million for the three months ended September 30, 2022 and 2021, respectively. Lease revenue was $48 million and $47 million for the nine months ended September 30, 2022 and 2021, respectively.

We categorize our products, services, and other revenues into the following five categories:

Data and Internet Services

We provide data and Internet services to our consumer, business and wholesale customers. Data and Internet services consist of fiber broadband services, copper broadband services and network access revenues.

Our fiber expansion strategy is expected to positively impact data and Internet services. This network expansion will provide faster, symmetrical broadband speeds and provide customer and revenue growth opportunities for fiber broadband and certain network access products like ethernet. This initiative will also create an opportunity for us to provide more fiber-based services to our customers.

‎

6248

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

~~Revenue by product and service type was as follows:~~

Successor
Predecessor
For the three
For the three
months ended
months ended
$ Increase
% Increase
($ in millions)
September 30, 2021
September 30, 2020
(Decrease)
(Decrease)
Data and Internet services
$
834
$
838
$
(4)
(0)
%
Voice services
411
500
(89)
(18)
%
Video services
149
186
(37)
(20)
%
Other
99
103
(4)
(4)
%
Revenue from contracts with customers ⁽¹⁾
1,493
1,627
(134)
(8)
%
Subsidy and other revenue
83
99
(16)
(16)
%
Total revenue
$
1,576
$
1,726
$
(150)
(9)
%
Non-GAAP
Combined
Predecessor
For the nine
For the nine
months ended
months ended
$ Increase
% Increase
($ in millions)
September 30, 2021
September 30, 2020
(Decrease)
(Decrease)
Data and Internet services
$
2,515
$
2,542
$
(27)
(1)
%
Voice services
1,341
1,538
(197)
(13)
%
Video services
477
595
(118)
(20)
%
Other
286
316
(30)
(9)
%
Revenue from contracts with customers ⁽¹⁾
4,619
4,991
(372)
(7)
%
Subsidy and other revenue
249
277
(28)
(10)
%
Total revenue
$
4,868
$
5,268
$
(400)
(8)
%

⁽¹⁾Lease revenue for the successor company for the three and nine months ended September 30, 2021 was $16 million and $47 million, respectively. Lease revenue for the predecessor company for the three and nine months ended September 30, 2020 was $16 million and $50 million, respectively.

~~We categorize our products, services, and other revenues into the following five categories:~~

~~Data and Internet Services~~

We provide data and internet services to our consumer, business and wholesale customers. Data and internet services consist of fiber broadband services, copper broadband services and network access revenues (data transmission services and dedicated high-capacity circuits including data services to wireless providers commonly called wireless backhaul). Network access services, which constitute approximately one third of this revenue category, are provided primarily to our business and wholesale customers while fiber and copper broadband, which constitute approximately two thirds of the revenue category, are provided to all customers.

Our fiber expansion initiative is expected to positively impact data and internet services. This network expansion will provide faster, symmetrical broadband speeds and provide customer and revenue growth opportunities for fiber broadband and certain network access products like ethernet. This initiative will also create an opportunity for us to migrate copper broadband and certain other network access products to fiber broadband and ethernet.

~~PART I. FINANCIAL INFORMATION (Continued)~~

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

~~(Unaudited)~~

($ in millions)
For the three months ended
For the nine months ended
Data and internet services revenue, September 30, 2020
$
838
$
2,542
Change in fiber broadband revenue
34
86
Change in copper broadband revenue
(7)
(22)
Change in network access revenue
(26)
(85)
Impact of fresh start accounting
(2)
(4)
Change in other data and internet services
(3)
(2)
Data and internet services revenue, September 30, 2021
$
834
$
2,515


($ in millions)	For the three months ended		For the nine months ended
Data and Internet services revenue, September 30, 2021	$	834	$	2,515
Change in fiber broadband revenue		38		101
Change in copper broadband revenue		(9)		(31)
Change in other data and Internet services		(15)		(52)
Impact of fresh start accounting		-		(2)
Data and Internet services revenue, September 30, 2022	$	848	$	2,531

Upon emergence from bankruptcy, the accumulated balances in deferred installation fee revenue were eliminated as part of fresh start accounting, which has resulted in a decline in revenue recognition. ~~After adjusting for this fresh start accounting impact, data and internet services revenue decreased $2 million and $23 million for the three and nine months ended September 30, 2021, respectively.~~

The revenue ~~declines were~~growth was primarily driven by ~~Frontier’s network access revenue and were offset by~~a 6% and 5% improvement in our broadband revenue offset by declines in other data revenue for the three and nine months ended September 30, ~~2021,~~2022, respectively, as compared to the corresponding periods in ~~2020.~~2021. The increases in broadband revenue were driven by growth in fiber, offset somewhat by continued declines in copper. The ~~Network access~~other data revenues declines were the result of an ongoing migration of our carrier customers from legacy technology circuits to lower priced ethernet circuits.

The period over period decrease in data and ~~internet~~Internet services revenue continued to improve for the three and nine months ended September 30, ~~2021, as compared to the first six months of 2021,~~2022, as a result of the Company’s initiatives.

Voice Services

The Company provides voice services consisting of traditional local and long-distance service and voice over ~~internet~~Internet protocol (VoIP) service provided over our fiber and copper broadband products. It also includes enhanced features such as call waiting, caller identification and voice messaging services.

($ in millions)
For the three months ended
For the nine months ended
Voice services revenue, September 30, 2020
$
500
$
1,538
Change in local and long-distance service revenue
(27)
(105)
Impact of fresh start accounting
(50)
(78)
Change in other voice services revenue
(12)
(14)
Voice services revenue, September 30, 2021
$
411
$
1,341


($ in millions)	For the three months ended		For the nine months ended
Voice services revenue, September 30, 2021	$	411	$	1,341
Change in other voice services revenue		(42)		(129)
Impact of fresh start accounting		-		(76)
Voice services revenue, September 30, 2022	$	369	$	1,136

Upon implementation of fresh start accounting policies, Frontier is recording both revenue and expense related to Universal Service Fund ~~(USF)~~(“USF”) surcharges on a net basis, as opposed to recording each on a gross basis prior to emergence. ~~After adjusting for the impact of these revenues, voice services revenue declined $39 million and $119 million for the three and nine months ended September 30, 2021, respectively.~~ These declines were primarily due to net losses in business and consumer customers in addition to fewer customers bundling voice services with broadband.

Video Services

Video services include revenues generated from traditional television (TV) services provided directly to consumer customers as well as satellite TV services provided through Dish. Video services also includes pay-per-view revenues, video on demand, equipment rentals, and video advertising. The Company has made the strategic decision to limit sales of new traditional TV services, focusing on our broadband products and OTT video options. We are partnering with OTT video providers and expect this to grow as OTT options are offered with our broadband products.

‎

6449

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

~~Video Services~~

Video services include revenues generated from traditional television (TV) services provided directly to consumer customers as well as satellite TV services provide through Dish. We are partnering with over-the-top (OTT) video providers and expect this to grow as OTT options are offered with our broadband products. Video services also includes pay per view revenues, video on demand, equipment rentals, and video advertising. The Company has made the strategic decision to limit sales of new traditional TV services, focusing on our broadband products and OTT video options.

($ in millions)
For the three months ended
For the nine months ended
Video services revenue, September 30, 2020
$
186
$
595
Change in video services revenue
(30)
(106)
Impact of fresh start accounting
(7)
(12)
Video services revenue, September 30, 2021
$
149
$
477


($ in millions)	For the three months ended		For the nine months ended
Video services revenue, September 30, 2021	$	149	$	477
Change in video services revenue		(22)		(71)
Impact of fresh start accounting		-		(8)
Video services revenue, September 30, 2022	$	127	$	398

Under our fresh start accounting policies, Frontier is recording both revenue and expense related to certain surcharges and taxes on a net basis, as opposed to recording each on a gross basis prior to emergence. ~~After adjusting for the impact of these revenues, video services revenue declined $30 million and $106 million for the three and nine months ended September 30, 2021, respectively.~~ These declines were primarily driven by linear video customer losses, partially offset by price increases.

Other

Other customer revenue includes directory listing services and switched access ~~revenue and sales of voice and data equipment (CPE) to our business customers.~~revenue. Switched access revenue includes revenue derived from allowing other carriers to use our network to originate and/or terminate their local and long-distance voice traffic. These services are primarily billed on a minutes-of-use basis applying tariffed rates filed with the FCC or state agencies.

($ in millions)
For the three months ended
For the nine months ended
Other customer revenue, September 30, 2020
$
103
$
316
Change in other customer revenue
(11)
(38)
Impact of fresh start accounting
7
8
Other customer revenue, September 30, 2021
$
99
$
286


($ in millions)	For the three months ended		For the nine months ended
Other revenue, September 30, 2021	$	99	$	286
Change in other services revenue		(17)		(49)
Impact of fresh start accounting		-		8
Other revenue, September 30, 2022	$	82	$	245

Under our fresh start accounting policies, ~~Frontier has~~we have classified the provision for bad debt as expense, rather than a reduction of revenue as it was recorded prior to emergence, resulting in increases to other customer revenues of ~~$16 million and $23~~$14 million for the ~~three and~~ nine months ended September 30, ~~2021, respectively.~~2022. Additionally, the accumulated balances in deferred installation fee revenue were eliminated as part of fresh start accounting, which has resulted in a ~~$9 million and $15~~$6 million decline in revenue recognized for the ~~three and~~ nine months ended September 30, ~~2021, respectively,~~2022, as compared to the prior year ~~period.~~periods. After adjusting for the impacts of these policy changes, ~~Other~~other customer services revenue declined ~~$11 million and $38~~$49 million for the ~~three and~~ nine months ended September 30, ~~2021, respectively.~~2022. These decreases were primarily driven by reductions in CPE sales, late payment fees, early termination fees and reconnect fees.

Subsidy and other revenue

Subsidy and other revenue decreased for the three and nine months ended September 30, 2022, compared to the prior year period, primarily due to the completion of the CAF II program in 2021.


($ in millions)	For the three months ended		For the nine months ended
Subsidy and other revenue, September 30, 2021	$	83	$	249
Change in CAF II subsidies		(74)		(231)
Change in RDOF, subsidy, and other services revenue		9		17
Impact of fresh start accounting		-		5
Subsidy and other revenue, September 30, 2022	$	18	$	40

As a result of a fresh start accounting policy change, certain governmental grants that were historically presented on a net basis as part of capital expenditures, are presented on a gross basis and included in subsidy, resulting in increases to subsidy and other revenue of $5 million for the nine months ended September 30, 2022.

‎

6550

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

~~Subsidy and other revenue~~

~~Subsidy and other revenue decreased $16 million and $28 million for the three and nine months ended September 30, 2021.~~OPERATING EXPENSES

($ in millions)
For the three months ended
For the nine months ended
Subsidy and other revenue, September 30, 2020
$
99
$
277
Change in transition service revenue
(15)
(25)
Change in CAF II and other subsidies
(3)
(5)
Impact of fresh start accounting
2
2
Subsidy and other revenue, September 30, 2021
$
83
$
249


	For the three months		For the three months
($ in millions)	ended September 30,		ended September 30,		($)		%
	2022		2021		Variance		Variance
Operating expenses:
Cost of Service	$	544	$	590	$	(46)	(8)	%
Selling, general, and administrative expenses		431		421		10	2	%
Depreciation and amortization		296		273		23	8	%
Restructuring costs and other charges		4		8		(4)	(50)	%
Total operating expenses	$	1,275	$	1,292	$	(17)	(1)	%


	Successor		Non-GAAP Combined
	For the nine months		For the nine months
($ in millions)	ended September 30,		ended September 30,		($)		%
	2022		2021		Variance		Variance
Operating expenses:
Cost of Service	$	1,643	$	1,816	$	(173)	(10)	%
Selling, general, and administrative expenses		1,293		1,227		66	5	%
Depreciation and amortization		870		958		(88)	(9)	%
Restructuring costs and other charges		88		26		62	238	%
Total operating expenses	$	3,894	$	4,027	$	(133)	(3)	%

~~The transition services agreement~~ ~~related to the disposal~~Cost of ~~our Northwest Operations and has been discontinued.~~ Upon implementation of new fresh start accounting policies, certain governmental grants that were historically presented on a net basis as part of capital expenditures, are presented on a gross basis and included in subsidy, resulting in increases to Subsidy and other revenue of $2 million for the three and nine months ended September 30, 2021.service

~~OPERATING EXPENSES~~

For the three months ended
For the nine months ended
September 30,
September 30,
($ in millions)
2021
2020
2021
2020
Variance
Non-GAAP
Variance
Successor
Predecessor
%
Combined
Predecessor
%
Operating expenses:
Network access expenses
$
177
$
226
(22)
%
$
568
$
753
(25)
%
Network related expenses
413
431
(4)
%
1,248
1,279
(2)
%
Selling, general and administrative
expenses
421
404
4
%
1,227
1,229
-
%
Depreciation and amortization
273
392
(30)
%
958
1,204
(20)
%
Loss on Disposal of Northwest
Operations
-
-
-
%
-
160
(100)
%
Restructuring costs and
other charges
8
3
167
%
26
87
(70)
%
Total operating expenses
$
1,292
$
1,456
(11)
%
$
4,027
$
4,712
(15)
%

~~Network access expenses~~

~~Network access~~Cost of service expenses include access charges and other third-party costs directly attributable to connecting customer locations to our network, video content costs and certain promotional costs. Such access charges and other third-party costs exclude network related expenses, depreciation and amortization, and employee related expenses.

As a result of the fresh start accounting policy change to account for USF fees and certain other surcharges and taxes on a net basis instead of on a gross basis in both revenue and expense, cost of service decreased by $84 million for the nine months ended September 30, 2022. After adjusting for this fresh start change, cost of service declined $89 million for the nine months ended September 30, 2022. For the three and nine months ended September 30, ~~2021,~~2022, the decrease in ~~network access~~cost of service expense was driven by lower video content costs as a result of declines in video customers, non-renewal of certain content agreements and decreased CPE costs.

~~PART I. FINANCIAL INFORMATION (Continued)~~

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

~~(Unaudited)~~

~~Network related expenses~~

~~Network related expenses include expenses associated with the delivery of services to customers~~ These decreases more than offset higher fuel and ~~the operation~~energy prices, and maintenance of our network, such as facility rent, utilities, maintenance and other costs, as well as salaries, wages and related benefits associated with personnel who are responsible for the delivery of services, and the operation and maintenance of our network.

Under our fresh start accounting policies we account for USF fees and certain other surcharges and taxes on a net basis instead of on a gross basis in both revenue and expense. Network related expense was $45 million and $76 million lower for the three and nine months ended September 30, 2021, respectively as compared to prior year period. Adjusting for this change in accounting policy, network related expenseoutside service rate increases resulting from increased $27 million and $45 million for the three and nine months ended September 30, 2021, respectively. This increase was driven by increased compensation and benefits costs for Frontier employees and increased utilities costs.

inflation.

Selling, general, and administrative expenses

Selling, general, and administrative expenses (SG&A expenses) include the salaries, wages and related benefits and the related costs of corporate and sales personnel, travel, insurance, non-network related rent, advertising, and other administrative expenses.

As a result of the fresh start accounting policy change to classify the provision for bad debt as an expense rather than a reduction to revenue, SG&A expenses were ~~$16 million and $23~~$14 million higher for the ~~three and~~ nine months ended September 30, ~~2021, respectively.~~2022. Additionally, as a result of fresh start accounting policy changes, we have expensed ~~$14 million and $24~~$17 million of certain administrative items that were previously capitalized by the predecessor for ~~the three and~~ nine months ended September 30, ~~2021, respectively. Also, as a result of~~2022. After adjusting for the fresh start ~~accounting policy change to account for USF fees and certain other surcharges and taxes on a net basis instead of on a gross basis in both revenue and expense,~~impacts, SG&A ~~Expenses decreased~~expenses increased by ~~$12~~$35 million ~~and $17 million~~ for ~~the three and nine months ended September 30, 2021, respectively.~~After adjusting for these fresh start impacts changes, SG&A expense declined $1 million and $28 million for the three and nine month periods ended September 30, 2021, respectively. This decrease was a result of, ~~reduced property taxes and lower headcount, partially offset by higher professional services and recruiting fees.~~

~~Depreciation and amortization~~

As a result of fresh start accounting, both Frontier’s fixed assets and intangible assets were adjusted to fair value as of the Effective Date. These changes, which decreased the carrying value of its fixed assets and increased the carrying value of its intangible assets. For the three and nine months ended September 30, 2021, the decreased depreciation and amortization expense was driven by lower depreciation expense as a result of reduced fixed asset bases following the fresh start adjustment noted above. For the nine months ended September 30, ~~2021, the reduction~~2022.This increase was primarily a result of transformational investments that are non-recurring such as rebranding costs, higher professional services and recruiting fees, partially offset by a non-recurring $11 million sales tax refund in ~~depreciation expense was combined with lower amortization expense compared to the prior year, primarily due to the accelerated method of amortizing customer list intangibles during 2020.~~

~~Loss on disposal of Northwest Operations~~

~~During the nine months ended September 30, 2020, Frontier recorded a loss on disposal of $160 million associated with the sale of the Northwest Operations.~~

~~Restructuring costs and other charges~~

Restructuring costs and other charges consist of consulting and advisory fees related to our balance sheet restructuring prior to filing our Chapter 11 Cases and subsequent to the Emergence Date, workforce reductions, transformation initiatives, other restructuring expenses.

~~For the three months ended September 30, 2021, restructuring costs and other charges increased slightly due to increased severance and employees costs resulting from workforce reductions.~~

2022.

6751

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

For the nine months ended September 30, 2021, restructuring costs and other charges decreased due to a reduction in our consulting and advisory fees related to our balance sheet restructuring when comparing those that were incurred prior to filing our Chapter 11 Cases and those that were incurred subsequent to the Emergence Date.

Pension and Other Postretirement Employee Benefit (OPEB) costs

Frontier allocates certain pension/OPEB expense to ~~network related expenses~~Cost of service and SG&A expenses. Total ~~Non-GAAP combined~~ pension and OPEB service costs ~~for~~were as follows:


($ in millions)	For the three months ended September 30, 2022		For the three months ended September 30, 2021
Total pension/OPEB expenses	$	17	$	24
Less: costs capitalized into capital expenditures		(4)		(6)
Net pension/OPEB costs	$	13	$	18


	Successor		Non-GAAP Combined
($ in millions)	For the nine months ended September 30, 2022		For the nine months ended September 30, 2021
Total pension/OPEB expenses	$	65	$	79
Less: costs capitalized into capital expenditures		(15)		(17)
Net pension/OPEB costs	$	50	$	62

Depreciation and amortization

As a result of fresh start accounting, both Frontier’s fixed assets and intangible assets were adjusted to fair value as of the Effective Date. These changes decreased the carrying value of its fixed assets and increased the carrying value of its intangible assets. For the three and nine months ended September 30, ~~2021~~2022, the decreased depreciation and amortization expense was driven by lower depreciation expense as ~~compared~~a result of reduced fixed asset bases following the fresh start adjustment noted above.

Restructuring costs and other charges

Restructuring costs and other charges consist of consulting and advisory fees related to our balance sheet restructuring prior to filing our Chapter 11 Cases and subsequent to the Effective Date, workforce reductions, transformation initiatives, lease impairment costs, and other restructuring expenses.

For the three months ended September 30, 2022, restructuring costs and other charges decreased due to lower severance and employee costs resulting from workforce reductions of $3 million, and lower costs related to other restructuring activities of $1 million.

For the nine months ended September 30, ~~2020 were as follows:~~2022, restructuring costs and other charges increased due to

For the three months ended
For the nine months ended
September 30,
September 30,
($ in millions)
2021
2020
2021
2020
Variance
Non-GAAP
Variance
Successor
Predecessor
%
Combined
Predecessor
%
Net Pension/OPEB Costs:
Pension/OPEB service costs
$
24
$
29
(17)
%
$
79
$
88
(10)
%
Less: Costs capitalized into
capital expenditures
(6)
(5)
20
%
(17)
(18)
(6)
%
Net Pension/OPEB Costs
$
18
$
24
(25)
%
$
62
$
70
(11)
%

~~OTHER NON-OPERATING INCOME AND EXPENSE~~

~~The following table represents our Non-GAAP combined financial results for~~$44 million of lease impairment costs from the ~~three~~strategic exit of certain facilities, $35 million of severance and ~~nine months ended September 30, 2021 as compared~~employee costs resulting from workforce reductions, and $9 million of costs related to other restructuring activities. Of the $35 million in severance and employee costs, approximately $26 million related to the ~~financial results~~second quarter of ~~our consolidated operations (including the Northwest Operations) for the three and nine months ended September 30, 2020.~~2022, as a result of larger workforce reductions in that period.

For the five
For the four
For the three months ended
months ended
months ended
For the nine months ended
September 30,
September 30,
April 30,
September 30,
($ in millions)
2021
2020
2021
2021
2021
2020
Non-GAAP
Successor
Predecessor
Successor
Predecessor
Combined
Predecessor
Non-operating income (expense):
Investment and other
income (loss), net
$
(37)
$
(14)
$
(39)
$
1
$
(38)
$
(29)
Pension settlement costs
$
-
$
-
$
-
$
-
$
-
$
(159)
Reorganization items, net
$
-
$
(131)
$
-
$
4,171
$
4,171
$
(273)
Interest expense
$
(90)
$
(121)
$
(152)
$
(118)
$
(270)
$
(664)
Income tax benefit (expense)
$
31
$
(11)
$
74
$
(136)
$
(62)
$
(91)
Net income (loss)
$
126
$
15
$
225
$
4,541
$
4,766
$
(352)

‎

6852

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

OTHER NON-OPERATING INCOME AND EXPENSE


	For the three months ended September 30,		For the three months ended September 30,		$		%
($ in millions)	2022		2021		Variance		Variance

Investment and other income (loss), net	$	211	$	(37)	$	248		NM
Pension settlement costs	$	(50)	$	-	$	(50)		100	%
Interest expense	$	(135)	$	(90)	$	(45)		50	%
Income tax expense	$	75	$	31	$	44		142	%

	Successor				Predecessor		Non-GAAP Combined
	For the nine months ended September 30,		For the five months ended September 30,		For the four months ended April 30,		For the nine months ended September 30,			$		%
($ in millions)	2022		2021		2021		2021			Variance		Variance

Investment and other income (loss), net	$	410	$	(39)	$	1	$	(38)		$	448	NM
Pension settlement costs	$	(50)	$	-	$	-	$	-		$	(50)	100	%
Reorganization items, net	$	-	$	-	$	4,171	$	4,171		$	(4,171)	(100)	%
Interest expense	$	(356)	$	(152)	$	(118)	$	(270)		$	(86)	32	%
Income tax expense (benefit)	$	174	$	74	$	(136)	$	(62)		$	236	(381)	%

NM - Not meaningful

Investment and other income (loss), net

Investment and other ~~loss,~~income, net increased by ~~$23~~$248 million and $9$448 million for the three and nine months ended September 30, ~~2021, respectively,~~2022, respectively. These increases were driven by ~~higher net~~remeasurement gains for our other postretirement benefit obligation of $84 million for the three months ended September 30, 2022 and $234 million for the nine months ended September 30, 2022. Additionally, we recorded a remeasurement gain related to our pension plan of $91 million during the three months ended September 30, 2022.

We had additional increases as a result of favorable changes in our non-operating pension and ~~OPEB expense~~other postretirement costs of $55 million and $99 million for the three and nine months ended September 30, 2022, respectively, as compared to the prior year. This decrease was driven by reduced pension expense as a result of the elimination of actuarial losses that were amortized from accumulated other comprehensive income (loss) prior to emergence, offset by increased OPEB expense including remeasurement charges of $13 million recognized in May 2021 and $54 million recognized in August 2021.year periods.

Pension settlement

During the nine months ended September 30, ~~2020,~~2022, lump sum pension settlement payments to terminated or retired individuals amounted to ~~$464~~$177 million, which exceeded the settlement threshold of ~~$211~~$169 million, and as a result, Frontier recognized non-cash settlement charges totaling ~~$159~~$50 million for the nine months ended September 30, ~~2020.~~2022.

Reorganization items, net

~~The Company has~~We incurred costs associated with the reorganization, primarily the write-off of certain debt issuance costs and net discounts, financing costs, and legal and professional fees and fresh start accounting adjustments. These include expenses incurred subsequent to the Petition Date. During the nine months ended September 30, 2021, Frontier recognized $4,171 million in reorganization items associated with the restructuring of our balance ~~sheet primarily due to the $11 billion gain associated with the cancellation of debt, offset by other adjustments related to emergence and fresh start accounting.~~

~~During the three and nine months ended September 30, 2020, Frontier incurred $131 million and $273 million in reorganization costs, respectively, associated with the restructuring of our balance~~ sheet.

Interest expense

For the three and nine months ended September 30, ~~2021~~2022, interest expense ~~decreased $31~~increased $45 million and ~~$394~~ $86

PART I. FINANCIAL INFORMATION (Continued)

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million, ~~respectively,~~ as compared to the same periods in ~~2020.~~2021. The ~~decline~~increase in interest expense was primarily driven by ~~reduced~~a higher debt balance, as well as higher interest rates resulting from the refinancing of our secure debt, the unrecorded interest related to our unsecured notes prior to emergence from bankruptcy, and the overall reduction in our principal debt balance. The weighted average interest rate as of September 30, 2021 and 2020 was 5.658% and 8.668%, respectively.rates.

Income tax expense ~~(benefit)~~

During the three months ended September 30, 2022, we recorded income tax expense of $75 million on pre-tax income of $195 million. During the three months ended September 30, 2021, we recorded income tax expense of $31 million on pretax income of $157 million.

During the nine months ended September 30, 2022 we recorded income tax expense of $174 million on pre-tax income of $460 million. During the five months ended September 30, 2021, we recorded income tax expense of $74 million on pre-tax income of $299 million.During the four months ended April 30, 2021, ~~the Predecessor~~we recorded an income tax benefit of $136 million on pre-tax income of $4,405 million. ~~The driver~~

Our effective tax rates for the ~~benefit was~~three and nine months ended September 30, 2022 were 38.5% and 37.8%, respectively. The effective rate increased as a result of increases to the state rate due to valuation allowances in certain states, arising from non-deductible interest expense primarily related to our $1.2 billion first lien note issuance. Our effective tax ~~effect of fresh start accounting adjustments. During~~rates for the five months ended September 30, 2021 and the ~~successor recorded income tax expense of $74 million on pre-tax income of $299 million. Our effective tax rates for the~~ four months ended April 30, 2021 were 24.7% and ~~the five months ended September 30, 2021 were~~ (3.1%) ~~and 24.7%~~, respectively.

‎

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(b) Liquidity and Capital Resources

~~Frontier emerged from the Chapter 11 Cases on the effective date with a new capital structure consisting~~As of ~~significantly lower levels of long-term debt as compared to the Company’s historical debt levels. The reorganization resulted in the elimination~~September 30, 2022, we had liquidity of approximately ~~$11 billion of our long-term debt and a corresponding decrease in the capital needed for debt service requirements. Following emergence, we expect that our principal uses~~$3,322 million, comprised of cash and ~~capital resources will be to fund the cost~~cash equivalents of ~~operations, working capital,~~$230 million, $2,325 million of short-term investments consisting of term deposits earning interest in excess of traditional bank deposit rates, and ~~capital expenditures~~placed with banks with A-1/P-1 or equivalent credit quality, and ~~to fund interest payments~~our available capacity on our ~~long-term debt.~~undrawn revolving credit facility of $767 million.

Analysis of Cash Flows

As of September 30, ~~2021,~~2022, we had unrestricted cash and cash equivalents aggregating ~~$1,211~~$230 million. For the nine months ended September 30, ~~2021,~~2022, we used cash flow from operations, cash on hand, and cash from prior year borrowings principally to fund ~~payments related to our emergence from Chapter 11 bankruptcy and~~ our cash investing and financing activities, which were primarily short-term investments and capital expenditures.

On ~~October 13, 2021,~~May 12, 2022, our consolidated subsidiary Frontier Communications Holdings, LLC (“Frontier Holdings”), issued ~~$1.0~~$1.2 billion aggregate principal amount of ~~6.0% second~~8.750% first lien secured notes due 2030 in an offering pursuant to exemptions from the registration requirements of the Securities Act. ~~The Company intends~~We intend to use the net proceeds of this offering to fund capital investments and operating costs arising from ~~the Company’s~~our fiber build and expansion of its fiber customer base, and for other general corporate purposes. ~~Giving effect to this offering, our liquidity as of September 30, 2021, would have been $2.7 billion.~~

As of September 30, ~~2021,~~2022, we had a working capital surplus of ~~$307~~$1,101 million compared to a ~~$4,486~~$1,237 million ~~deficit~~surplus at December 31, ~~2020.~~2021. The primary driver for the change in the working capital ~~deficit~~surplus at September 30, ~~2021~~2022 was ~~classification of our long-term debt as current as a result of the Chapter 11 Cases.~~

Non-GAAP
Combined
Predecessor
For the nine
For the nine
months ended
months ended
($ in millions)
September 30, 2021
September 30, 2020
Cash provided by (used for):
Operating activities
$
329
$
1,492
Investing activities
$
(1,135)
$
315
Financing activities
$
180
$
(791)

an increase in short-term investments, accounts payable and accrued interest.

Cash Flows from Operating Activities

~~Non-GAAP combined cash~~Cash flows ~~used by~~provided from operating activities ~~decreased $1,163~~increased $712 million to ~~$329~~$1,041 million for the nine months ended September 30, ~~2021~~2022 as compared to the nine months ended September 30, ~~2020.~~2021. The overall ~~decrease~~increase in operating cash flows was primarily the result of ~~payments of excess cash to unsecured senior noteholders and payments of prepetition accounts payable following our emergence from bankruptcy totaling $1,169 million.~~changes in working capital.

We paid ~~$36~~$7 million in net cash taxes during the nine months ended September 30, ~~2021~~2022 and $6$36 million in Non-GAAP combined net cash taxes during the Non-GAAP combined nine months ended September 30, 2021.

Cash Flows from Investing Activities

Cash flows used in investing activities were $4,178 million for the nine months ended September 30, ~~2020.~~2022, compared to Non-GAAP combined cash flows used in investing activities of $1,135 million for the corresponding period in 2021. Given the long-term nature of our fiber build, as of September 30, 2022, we have invested $2,325 million cash in short-term investments to improve interest income, while preserving funding flexibility.

Capital Expenditures

For the nine months ended September 30, 2022 and 2021, our capital expenditures were $1,860 million and $1,146 million, respectively. Approximately 57% of our capital expenditures in the first nine months of 2022 related to fiber network projects. The increase in capital expenditures was driven by increased spending for fiber upgrades to our existing copper network, a trend that we expect to continue as we execute our strategy of investing in our fiber network. In addition to the capital expenditures noted above, we had a balance of $431 million in “Accounts payable” on our consolidated balance sheet related to capital expenditures that had not been paid as of September 30, 2022.

Cash Flows from Financing Activities

Cash flows provided from financing activities increased $1,039 million to $1,219 million for the nine months ended September 30, 2022 as compared to the Non-GAAP combined corresponding period in 2021. The increase in financing activities was primarily driven by $1,200 million proceeds from long-term debt borrowings partially offset

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~~Cash Flows from Investing Activities~~

Non-GAAP combined cash flows used in investing activities were $(1,135) million for the nine months ended September 30, 2021, compared to cash flows provided by investing activities of $315 million for the corresponding period in 2020.

~~Capital Expenditures~~

For the nine months ended September 30, 2021 and 2020, our Non-GAAP combined capital expenditures were $1,146 million and $825 million, respectively. Capital expenditures related to CAF Phase II are included in our reported amounts for capital expenditures. The driver for the increase in capital expenditure was increased spending for fiber upgrades to our existing copper network, a trend that we expect to continue as we execute our strategy of investing in our fiber network.

~~In the second quarter of 2020, we received $1,131 million in proceeds from the sale of our Northwest Operations.~~

~~Cash Flows from Financing Activities~~

~~Cash flows provided~~ by financing activities increased $971 million to $180 million for the nine months ended September 30, 2021 as compared to 2020. The increase is primarily the result of receiving $225 million in proceeds from the exit term loan facility in 2021, offset by full repayment of the revolver in September 30, 2020 of $749 million.costs, lease obligations payments, long-term debt principal payments and other costs.

Capital Resources

The Restructuring resulted in a new capital structure with significantly lower levels of long-term debt. Upon emergence, our consolidated long-term debt decreased from approximately $16,769 million to $6,738 million. During the nine months ended September 30, 2021, we paid $205 million of cash interest.

In connection with the Restructuring, we paid $1,313 million to Old Frontier’s unsecured senior note holders, $62 million related to prepetition accounts payable and contract cure payments and $22 million for professional fees and other bankruptcy related costs.

~~We expect that our~~Our primary anticipated uses of liquidity ~~will be~~are to fund the costs of operations, working capital and capital expenditures and to fund interest payments on our long-term debt. Our primary sources of liquidity are cash flows from operations, cash on hand and borrowing capacity under our ~~$625~~$900 million Revolving Facility (as reduced by ~~$90~~$133 million of revolver Letters of Credit.)

On May 12, 2022, Frontier Holdings entered into an amendment to its Revolving Facility which, among other things, increased the Revolving Facility by an additional $275 million, to a total of $900 million in aggregate principal amount of revolving credit commitments, and provided that the Revolving Facility be amended to reflect Secured Overnight Financing Rate “SOFR” based interest rates (including a customary spread adjustment). We anticipate that Frontier Holdings will transition to SOFR based borrowing under its Term Loan Facility, in accordance with the terms thereof, upon the final phase out of LIBOR at the end of June 2023. We do not expect this transition to materially impact the amount of interest payments under the Term Loan Facility.

Our Amended and Restated Credit ~~Facilities,~~Agreement, including our ~~$1,468~~$1,453 million Term Loan Facility and ~~$625~~$900 million Revolving Facility, and the indentures governing our outstanding secured First Lien Notes and Second Lien Notes are described in detail in Note 118 to the financial statements contained in Part I of this report.

During the nine months ended September 30, 2022, we paid $286 million of cash interest. Our long-term debt is described in detail in Note 8 to the financial statements contained in Part I of this report.

We have assessed our current and expected funding requirements and our current and expected sources of liquidity, and have determined, based on our forecasted financial results and financial condition as of September 30, ~~2021,~~2022, that our operating cash flows and existing cash balances, will be adequate to finance our working capital requirements, fund capital expenditures, make required debt interest and principal payments, pay taxes and make other payments. A number of factors, including but not limited to, losses of customers, pricing pressure from increased competition, lower subsidy and switched access revenues, and the impact of economic conditions may negatively affect our cash generated from operations.

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FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

~~(Unaudited)~~

Net Operating Losses

In connection with ~~the Company’s~~Frontier’s emergence from bankruptcy, ~~the Company~~we consummated a taxable disposition of substantially all of the assets and/or subsidiary stock of the Company. Certain of the NOLs were utilized in offsetting gains from the disposition, certain of the NOLS were extinguished as part of attribute reduction and certain subsidiary NOLS were carried over. Under Section 338(h)(10) of the Code, Predecessor and Successor made elections to step-up tax basis of certain subsidiary assets. Such Section 338(h)(10) elections will generate depreciation and amortization expense going forward, which may result in net operating losses on a go forward basis. Such net operating losses would be carried forward indefinitely but would be subject to an 80% limitation on U.S. taxable income.

Off-Balance Sheet Arrangements

We do not maintain any off-balance sheet arrangements, transactions, obligations or other relationships with unconsolidated entities that would be expected to have a material current or future effect upon our financial statements.

Contractual Obligations

Other than as disclosed elsewhere in this report with respect to the filing of the Chapter 11 Cases, the acceleration of substantially all of our debt, and the application of fresh start accounting, there have been no material changes outside the ordinary course of business to the information provided with respect to our contractual obligations, ~~including indebtedness and purchase and lease obligations, as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.~~

~~Future Commitments~~

In April 2015, the FCC released its right of first refusal offer of support to price cap carriers under the CAF Phase II program, which is intended to provide long-term support for broadband in high cost unserved or underserved areas. Frontier accepted the FCC’s CAF Phase II offer in 25 states, which provides $313 million in annual support through 2021, to make available 10 Mbps downstream/1 Mbps upstream broadband service to households across some of the 25 states where we operate.

To the extent we do not enable the required number of households with 10 Mbps downstream/1 Mbps upstream broadband service by the end of the CAF Phase II deployment deadline of December 31, 2021 or we are unable to satisfy other FCC CAF Phase II requirements, Frontier would be required to return a portion of the funds previously received and may be subject to certain other requirements and obligations.

~~Critical Accounting Policies and Estimates~~

The preparation of our financial statements requires management to make estimates and assumptions. There are inherent uncertainties with respect to such estimates and assumptions; accordingly, it is possible that actual results could differ from those estimates and changes to estimates could occur in the near term. ~~These critical accounting estimates have been reviewed with the Audit Committee of our Board of Directors.~~

Except for the application of fresh start accounting, there have been no material changes to our critical accounting policies and estimates from the information provided in Item 7. “Management Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2020.

~~See Note 1 of the notes to the financial statements for updated accounting policies related to the application of fresh start accounting.~~

~~Recent Accounting Pronouncements~~

~~See Note 2 of the Notes to Consolidated Financial Statements included in Part I of this report for additional information related to recent accounting literature~~.

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including indebtedness and purchase and lease obligations, as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.

Future Commitments

See “Regulatory Developments” immediately below for information regarding Frontier’s known and potential future commitments related to our participation in the FCC’s CAF Phase II program and RDOF Phase I auction.

Regulatory Developments

Connect America Fund (“CAF”)/ Rural Digital Opportunity Fund (“RDOF”): In 2015, Frontier accepted the FCC’s CAF Phase II offer, ~~in 29 states,~~ which ~~provides $332~~provided $313 million in annual support ~~and in return the Company is committed~~through 2021, to make ~~broadband~~ available to approximately 774,000 locations within its footprint. This amount included approximately 41,000 locations and $19 million in annual support related to the four states of the Northwest Operations, which were disposed on May 1, 2020. The CAF Phase II program is intended to provide long-term support for carriers for establishing and providing broadband service with at least 10 Mbps downstream/1 Mbps upstream ~~speeds in high-cost unserved or underserved areas.~~broadband service to households across some of the 25 states where we operate. The ~~CAF II funding runs through and the Company must complete the CAF II~~ deployment bydeadline was December 31, ~~2021. Thereafter,~~2021, and final review and audit of households is not complete. To the ~~FCC will review carriers’ CAF II program completion data and if the FCC determines that the Company~~extent it is determined we did not enable the required number of households with 10 Mbps downstream/1 Mbps upstream broadband service or we were unable to satisfy ~~applicable FCC~~other CAF Phase II requirements, Frontier ~~could~~will be required to return a portion of the funds previously received and may be subject to certain other requirements and obligations. We have accrued an amount for any potential shortfall in the household build commitment that we deem to be probable and reasonably estimated, and we do not expect that any potential penalties, if ultimately incurred, will be material.

On January 30, 2020, the FCC adopted an order establishing ~~the Rural Digital Opportunity Fund (RDOF),~~RDOF, a competitive reverse auction to provide support to serve high cost areas. ~~The FCC held~~Under the FCC’s RDOF Phase I auction, ~~from October 29, 2020 through November 25, 2020, and announced the results on December 7, 2020.~~ Frontier was awarded approximately $371 million over ten years to build gigabit-capable broadband over a fiber-to-the-premises network to approximately 127,000 locations in eight states (California, Connecticut, Florida, Illinois, New York, Pennsylvania, Texas, and West Virginia). Frontier ~~submitted its Long Form application to the FCC on January 29, 2021 and, assuming the long-form application is granted by the FCC, anticipates that it will begin~~began receiving funding ~~on January 1,~~under RDOF in the second quarter of 2022 ~~in which case, Frontier~~and will be required to complete the buildout to ~~the RDOF~~these locations by December 31, ~~2027,~~2028, with interim target milestones over this period.

~~After~~As part of its RDOF order, the FCC ~~completes its current requirement to update its broadband maps with more granular broadband availability information, the FCC plans to~~indicated it would hold a ~~second~~follow-on auction for the unawarded funding following the Phase I auction. However, it remains uncertain whether any ~~remaining locations with~~such follow-on auction will occur given the ~~remaining~~recent passage of significant federal funding ~~expected to be up to approximately $11.2 billion.~~for broadband infrastructure funding.

COVID-19 Initiatives: The Federal government has undertaken several measures to address the ongoing impacts of the COVID-19 pandemic and to facilitate enhanced access to high speed broadband, including through several new funding programs. As these large amounts of federal funding flow through the broadband ecosystem, we will evaluate and pursue funding opportunities that make sense for our business. Because of the severity, magnitude and duration of the COVID-19 pandemic and its economic consequences are uncertain and rapidly changing, the impact of the crisis and the governmental responses to the crisis on our business in 2022 and beyond remains uncertain and difficult to predict.

Current and Potential Internet Regulatory Obligations: On October 1, 2019, the D.C. Circuit Court largely upheld the FCC decision in its 2018 Restoring Internet Freedom Order to reclassify broadband as an “information service.” However, the Court invalidated the FCC’s preemption of a state’s ability to pass their own network neutrality rules and remanded back to the FCC other parts of the 2018 Order. California’s network neutrality provisions have gone into effect. It is unclear whether pending or future appeals will have any impact on the regulatory structure, and it is unclear what impact future federal and/or state legislative or regulatory actions will have on net neutrality issues.

Privacy: Privacy-related legislation has been considered in a number of states. Legislative and regulatory action could result in increased costs of compliance, claims against broadband Internet access service providers and others, and increased uncertainty in the value and availability of data. On June 28, 2018, the state of California enacted comprehensive privacy legislation that, effective as of January 1, 2020, gives California consumers the right to know what personal information is being collected about them, and whether and to whom it is sold or disclosed, and to access and request deletion of this information. Subject to certain exceptions, it also gives consumers the right to opt-out of the sale of personal information. The law applies the same rules to all companies that collect ~~consumer information. It is unclear the degree to which federal legislative or regulatory action may impact privacy issues.~~

On October 1, 2019, the D.C. Circuit Court largely upheld the FCC decision in its 2018 Restoring Internet Freedom Order to reclassify broadband as an “information service.” However, the Court invalidated the FCC’s preemption of a state’s ability to pass their own network neutrality rules, and California’s network neutrality provisions have gone into effect. It is unclear whether pending or future appeals or regulatory challenges will have any impact on federal or state net neutrality provisions.

On March 13, 2020, in response to the COVID-19 pandemic, over 550 providers of critical communications services, including Frontier, took the FCC’s Keep Americans Connected pledge pursuant to which providers agreed (i) not to terminate service to any consumer or small business customers because of their inability to pay their bills due to the disruptions caused by the coronavirus pandemic; (ii) to waive any late fees that any consumer or small business customers incur because of their economic circumstances related to the coronavirus pandemic; and (iii) to open its Wi-Fi hotspots to any American who needs them. The Keep Americans Connected Pledge expired on June 30, 2020; however, state and federal governments continue to ask companies to aid in pandemic response. Some of the states we operate in have issued executive orders prohibiting the disconnection of services for customers for the length of the state of emergency and/or otherwise restrict the assessment of late fees during the pandemic. While certain customers have taken advantage of COVID-19 related relief programs, as of September 30, 2021, very few

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~~had past due balances beyond~~consumer information. On May 10, 2022, the ~~point~~state of ~~normal disconnection. Given the unprecedented and evolving nature of the pandemic and the evolving response of multiple levels of government, the impact of potential changes~~Connecticut enacted privacy legislation that became effective on ~~the Company~~July 1, 2022. Frontier's privacy protections are ~~not fully known at~~consistent with this ~~time.~~new legislation.

Video Programming: Federal, state, and local governments extensively regulate the video services industry. Our linear video services are subject to, among other things: subscriber privacy regulations; requirements that we carry a local broadcast station or obtain consent to carry a local or distant broadcast station; rules for franchise renewals and transfers; the manner in which program packages are marketed to subscribers; and program access requirements.

We provide video programming in some of our markets including California, Connecticut, Florida, Indiana, and Texas pursuant to franchises, permits and similar authorizations issued by state and local franchising authorities. Most franchises are subject to termination proceedings in the event of a material breach or expire in the ordinary course. In addition, most franchises require payment of a franchise fee as a requirement to the granting of authority.

Many franchises establish comprehensive facilities and service requirements, as well as specific customer service standards and monetary penalties for non-compliance. In many cases, franchises are terminable if the franchisee fails to comply with material provisions set forth in the franchise agreement governing system operations. We believe that we are in compliance and meeting all material standards and requirements. Franchises are generally granted for fixed terms and must be periodically renewed. Local franchising authorities may resist granting a renewal if either past performance or the prospective operating proposal is considered inadequate.

Our agreement with Verizon for use of the FiOS brand and trademark in markets acquired from them expired on March 31, 2021 and was not renewed or extended. Frontier rebranded our related data and video services as Frontier FiberOptic Internet and Frontier TV, respectively.

Environmental Regulation:The ~~Federal government has undertaken a number~~subsidiaries we operate are subject to federal, state, and local laws, and regulations governing the use, storage, disposal of, ~~measures~~and exposure to ~~address~~hazardous materials, the ~~ongoing impacts~~release of pollutants into the environment and the remediation of contamination. As an owner and former owner of property, we are subject to environmental laws that could impose liability for the entire cost of cleanup at contaminated sites, including sites formerly owned by us, regardless of fault or the lawfulness of the ~~COVID-19 pandemic~~activity that resulted in contamination. We believe that our operations are in substantial compliance with applicable environmental laws and regulations.

Critical Accounting Policies and Estimates

The preparation of our financial statements requires management to ~~facilitate enhanced access~~make estimates and assumptions. There are inherent uncertainties with respect to ~~high speed broadband. As part~~such estimates and assumptions; accordingly, it is possible that actual results could differ from those estimates and changes to estimates could occur in the near term. These critical accounting estimates have been reviewed with the Audit Committee of our Board of Directors.

There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2021.

Recent Accounting Pronouncements

See Note 2 of the Notes to Consolidated ~~Appropriations Act of 2021 passed~~Financial Statements included in ~~December 2020, Congress provided $3.2 billion in funding to help support access to broadband services. In furtherance~~Part I of this ~~objective, the Federal Communications Commission created the Emergency Broadband Benefit~~report for additional information related to provide an up to $50 (up to $75 on tribal lands) monthly benefit for qualifying low-income consumers to purchase broadband. Frontier is currently participating in the program. In March 2021, Congress also passed the American Rescue Plan Act (“ARPA”) of 2021 which created a new $10 billion Coronavirus Capital Projects Fund that will be available to the states for critical capital projects, including broadband infrastructure products, that directly enable work, education, and health monitoring. The ARPA also dedicated $350 billion to State and Local Coronavirus Fiscal Recovery Funds, which give states and localities the discretion to target a portion of the funding to broadband infrastructure, among many other permissible expenditure categories. Additionally, the President has proposed, and Congress continues to consider, $100 billion in additional funding for broadband infrastructure and adoption programs. Frontier cannot say at this time whether the federal government, states, and localities will use these funds in ways that may benefit Frontier or create additional competition in any of our markets. The ARPA also included $7.2 billion in funding for schools and libraries (the Emergency Connectivity Fund) that will provide support for connectivity that enables remote learning. The FCC has established rules prioritizing funding for on-campus services and devices, and Frontier does not know the impact this program may have, if any, at this point in time.recent accounting literature.

Item 3. Quantitative and ~~Qualitative~~Qualitative Disclosures about Market Risk

We are exposed to market risk in the normal course of our business operations due to ongoing investing and funding activities, including those associated with our pension plan assets. Market risk refers to the potential change in fair value of a financial instrument as a result of fluctuations in interest rates and equity prices. We do not hold or issue derivative instruments, derivative commodity instruments or other financial instruments for trading purposes. As a

PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS PARENT, INC. AND SUBSIDIARIES

(Unaudited)

result, we do not undertake any specific actions to cover our exposure to market risks, and we are not party to any market risk management agreements other than in the normal course of business. Our primary market risk exposures from interest rate risk and equity price risk are as follows:

Interest Rate Exposure

Our exposure to market risk for changes in interest rates relates primarily to the interest-bearing portion of our pension investment portfolio and the related actuarial liability for pension obligations, as well as our floating rate indebtedness. As of September 30, ~~2021, 78%~~2022, 84% of our total debt had fixed interest rates. We had no interest rate swap agreements in effect at September 30, ~~2021.~~2022. We believe that our currently outstanding obligation exposure to interest rate changes is minimal.

Our discount rate assumption for our pension benefit obligation is determined at least annually, or whenever required, with assistance from our actuaries based on the pattern of expected future benefit payments and the prevailing rates available on long-term, high quality corporate bonds with durations approximate to that of our benefit obligation. As of September 30, 2021, our discount rate utilized in calculating our benefit plan obligation was 3.10%.

Our objectives in managing our interest rate risk are to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, ~~22% of~~only our ~~outstanding borrowings~~$1.45 billion term loan facility has a floating interest rate at September 30, ~~2021 have floating interest rates.~~2022. The annual impact of a 100 basis ~~points~~point change in ~~the~~ LIBOR would result in approximately $15 million of additional interest expense, provided that the LIBOR rate exceeds the LIBOR floor. An adverse change in interest rates would increase the amount that we pay on our variable rate obligations and could result in fluctuations in the fair value of our fixed rate obligations. Interest income from cash invested in term deposits offsets the impact of higher interest expense from floating rate debt. Based upon our overall interest rate exposure, a near-term change in interest rates would not materially affect our consolidated financial position, results of operations or cash flows.

The discount rate assumption for our pension benefit obligation is determined at least annually, or when required, with assistance from our actuaries. The discount rate is based on the pattern of expected future benefit payments and the prevailing rates available on long-term, high quality corporate bonds with durations approximate to that of our benefit obligation. As of December 31, 2021, the discount rate was 2.90%. As of September 30, 2022, the discount rate is 5.60% which was updated in connection with the September 30, 2022 remeasurement.

The discount rate assumption for our OPEB obligation is determined in a similar manner to the pension plan. As of December 31, 2021, the discount rate was 3.00%. The discount rate was updated in connection with the remeasurements in February, May, July and September of 2022. As of September 30, 2022, the discount rate is 5.60% which was updated in connection with the September 30, 2022 remeasurement.

At September 30, 2022, the fair value of our debt was estimated to be approximately $8.02 billion, based on quoted market prices, our overall weighted average borrowing rate was 6.366% and our overall weighted average maturity was approximately seven years. Refer to Note 8 for discussion of the impact of the Chapter 11 Cases on our debt obligations.

Equity Price Exposure

Our exposure to market risks for changes in equity security prices as of September 30, 2022 is primarily limited to our pension plan assets. We have no other security investments of any significant amount.

The value of our pension plan assets decreased $696 million from $2,655 million at December 31, 2021 to $1,959 million at September 30, 2022. This decrease primarily resulted from changes in the market value of investments of $635 million including plan expenses, and benefit payments to participants of $233 million, partially offset by contributions of $172 million. While there is a significant reduction in the assets of the pension plan, the related liability is also expected to decrease due to increases in the related discount rate.

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~~exposure, a near-term change in interest rates would not materially affect our consolidated financial position, results of operations or cash flows.~~

~~At September 30, 2021,~~While there is a significant reduction in the ~~fair value~~assets of our debt was estimated to be approximately $7,070 million, based on quoted market prices, our overall weighted average borrowing rate was 5.658% and our overall weighted average maturity was approximately eight years. As of September 30, 2021, the ~~weighted average maturity increased~~pension plan, discount rates have risen by 270 basis points from ~~4.9 years~~2.90% as of December 31, ~~2020. Refer~~2021, to ~~Note 10 for discussion of the impact of the Chapter 11 Cases on our debt obligations.~~

Equity Price Exposure

~~Our exposure to market risks for changes in equity security prices~~5.60% as of September 30, ~~2021 is primarily limited~~2022. If these discount rates remain in effect through the end of 2022, the projected benefit obligation at December 31, 2022 would be lower by $930 million compared to ~~our~~the projected benefit obligation at December 31, 2021. On the funding side, a sustained pension asset loss could result in a reduced funding percentage and an increased minimum required contribution for the 2023 plan ~~assets. We have no other security investments of any significant amount.~~year.

The value of our pension plan assets increased $79 million from $2,507 million at December 31, 2020 to $2,586 million at April 30, 2021. This increase primarily resulted from contributions of $32 million and investment returns of $78 million, partially offset by benefit payments to participants of $25 million and plan expenses of $6 million.

The value of our pension plan assets increased $12 million from $2,586 million at April 30, 2021 to $2,598 million at September 30, 2021. This increase primarily resulted from investment returns of $68 million, partially offset by benefit payments to participants of $51 million and plan expenses of $5 million.

Item 4. Controls ~~and~~and Procedures

(a)Evaluation of disclosure controls and procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, regarding the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based upon this evaluation, our principal executive officer and principal financial officer concluded, as of the end of the period covered by this report, September 30, ~~2021,~~2022, that our disclosure controls and procedures were effective in recording, processing, summarizing and reporting on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act and were effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

(b)Changes in internal control over financial reporting

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified in an evaluation thereof that occurred during the first nine months of ~~2021~~2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

7560

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

On ~~April 30, 2018, an amended consolidated class action complaint was filed~~July 27, 2022, the Connecticut Public Utility Regulatory Authority (“PURA”) issued a Notice of Violation and Assessment of Civil Penalty Order to Cease and Desist (“NOV”) related to the underground excavation and placement of fiber facilities by Frontier and its contractors in Connecticut. The NOV alleged that Frontier and its contractors failed to comply with certain state excavation regulations which created public safety and compliance issues. The NOV prescribed a fine and ordered Frontier to discontinue certain underground fiber deployment work until the ~~United States District Court for~~Company submitted a compliance plan to ensure compliance with the ~~District of Connecticut on behalf of certain purported stockholders against~~applicable regulations. Frontier ~~certain of its current~~submitted a compliance and ~~former directors~~inspection plan consistent with the NOV and ~~officers~~paid the fine. On August 26, 2022, PURA approved Frontier’s compliance and inspection plan, and the ~~underwriters of certain Frontier securities offerings and~~Company is proceeding with underground fiber deployment in connection with certain disclosures relating to the CTF transaction. The complaint was brought on behalf of all persons who (1) acquired Frontier common stock between February 6, 2015 and February 28, 2018, inclusive, and/or (2) acquired Frontier common stock or Mandatory Convertible Preferred Stock. On March 8, 2019, the District Court granted in its entirety Frontier’s motion to dismiss the complaint and on March 24, 2020, the court denied plaintiffs’ motion for leave to amend. Plaintiffs appealed and prior to oral argument, the parties reached an agreement in principle to resolve the matter. The settlement, which will require court approval and will be covered by insurance, will have no material financial impact on the Company. In addition, shareholders filed derivative complaints on behalf of the Company in Connecticut, California, and Delaware courts. The derivative complaints are based, generally, on the same facts asserted in the consolidated class action complaint. Frontier believes the derivative complaints are meritless and does not expect those cases will have a material financial impact on the Company.Connecticut.

In addition, we are party to various other legal proceedings (including individual, class and putative class actions as well as federal and state governmental investigations) arising in the normal course of our business covering a wide range of matters and types of claims including, but not limited to, general contracts, billing disputes, rights of access, taxes and surcharges, consumer protection, trademark, copyright and patent infringement, employment, regulatory, tort, claims of competitors and disputes with other carriers. Such matters are subject to uncertainty and the outcome of individual matters is not predictable. However, we believe that the ultimate resolution of these matters, after considering insurance coverage or other indemnities to which we are entitled, will not have a material adverse effect on our financial position, results of operations, or cash flows.

Item 1A. Risk ~~Factors~~Factors

There have been no material changes to the Risk Factors described in Part 1, Item 1A “Risk Factors” in our ~~Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, which updated and replaced the “Risk Factors” described in Part 1, Item 1A in our~~ Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no unregistered sales of equity securities during the quarter ended September 30, ~~2021.~~2022.

~~ISSUER PURCHASES OF EQUITY SECURITIES~~

Upon emergence from the Chapter 11 Cases on April 30, 2021, all equity interests in Frontier outstanding prior to the Effective Date were canceled, released, and extinguished, and we are of no further force or effect and Reorganized Frontier issued a total of 244,401,000 shares of common stock to the holders of existing Senior Notes in partial satisfaction of the allowed Senior Notes claims.

The shares of common stock described above are exempt from registration under the Securities Act pursuant to Section 1145 of the Bankruptcy Code (which generally exempts from such registration requirements the issuance of securities under a plan of reorganization).
‎
‎

7661

PART II. OTHER INFORMATION

Item 6. ~~Exhibits~~Exhibits


(a)	Exhibits:
	Exhibit Number	~~Description~~
	~~4.1~~		Indenture, dated as of October 13, 2021, by and among Frontier Communications Holdings, LLC, the guarantors party thereto, the collateral grantor party thereto and Wilmington Trust, National Association, a national banking association, as trustee and as collateral agent (filed as Exhibit 4.1 to Frontier’s Current Report on Form 8-K filed on October 14, 2021).
	~~4.2~~	~~Form of 6.000% Second Lien Secured Notes due 2030 (included in Exhibit 4.1 to Frontier’s Current Report on Form 8-K filed on October 14, 2021).~~
	~~10.1~~	Amendment No. 1 to Amended and Restated Credit Agreement, dated as of October 13, 2021, by and among Frontier Communications Holdings, LLC, as borrower, JPMorgan Chase Bank, N.A., as administrative agent, Goldman Sachs Bank USA, as revolver agent, and the lenders party thereto (filed as Exhibit 10.1 to Frontier’s Current Report on Form 8-K filed on October 14, 2021).
	22	~~Subsidiaries of the Registrant~~Description
	31.1			Certification of Principal Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
	31.2			Certification of Principal Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
	32			Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	101			The following materials from Frontier’s Quarterly Report on Form 10-Q for the quarter ended ~~June~~September 30, ~~2021,~~2022, formatted in iXBRL (inline eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of ~~Operations;~~Income; (iii) the Consolidated Statements of Comprehensive Loss; (iv) the Consolidated Statements of Equity (Deficit); (v) the Consolidated Statements of Cash Flows; and (vi) Notes to Consolidated Financial Statements.
	104			Cover Page from Frontier’s Quarterly Report on Form 10-Q for the quarter ended ~~June~~September 30, ~~2021,~~2022, formatted in iXBRL and contained in Exhibit 101.

‎

7762

~~PART II. OTHER INFORMATION~~

~~SIGNATURE~~

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	FRONTIER COMMUNICATIONS PARENT, INC.



	By: /s/ ~~Donald Daniels~~William McGloin
	~~Donald Daniels~~William McGloin
	~~Senior Vice President and~~ Chief Accounting Officer and Controller
	(Principal Accounting Officer)

Date: November ~~3, 2021~~2, 2022


	Page
Part I. Financial Information (Unaudited)

Item 1. Financial Statements

Consolidated Balance Sheets as of September 30, ~~2021 (Successor)~~2022, and December 31, ~~2020 (Predecessor)~~2021	1

Consolidated Statements of Income for the three months ended September 30, 2022 (Successor), and the three months ended September 30, 2021 (Successor)	2

Consolidated Statements of ~~Operations~~Income for the ~~three~~nine months ended September 30, 2022 (Successor), the five months ended September 30, 2021 (Successor), and the ~~three~~four months ended ~~September~~April 30, ~~2020~~2021 (Predecessor)	3

Consolidated Statements of ~~Operations~~Comprehensive Income for the three months ended September 30, 2022 (Successor), the three months ended September 30, 2021 (Successor), the nine months ended September 30, 2022 (Successor), the five months ended September 30, 2021 (Successor), and the four months ended April 30, 2021 ~~(Predecessor), and the nine months ended September 30, 2020~~ (Predecessor)	4

Consolidated Statements of ~~Comprehensive Income (Loss)~~Equity for the three months ended September 30, 2021 (Successor), and the three months ended September 30, 2020 (Predecessor), and the five months ended September 30, 2021 (Successor), the four months ended April 30, 2021 (Predecessor), and the nine months ended September 30, ~~2020 (Predecessor)~~2022 (Successor); and for	5

Consolidated Statements of ~~Equity (Deficit)~~Cash Flows for the nine months ended September 30, 2022 (Successor), the five months ended September 30, 2021 (Successor), and the four months ended April 30, 2021 (Predecessor)~~, and the nine months ended September 30, 2020 (Predecessor)~~	6

Consolidated Statements of Cash Flows for the five months ended September 30, 2021 (Successor), the four months ended April 30, 2021 (Predecessor), and the nine months ended September 30, 2020 (Predecessor)	7

Notes to Consolidated Financial Statements	87

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	5338

Item 3. Quantitative and Qualitative Disclosures about Market Risk	7458

Item 4. Controls and Procedures	7560

Part II. Other Information

Item 1. Legal Proceedings	7661

Item 1A. Risk Factors	7661

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	7661

Item 6. Exhibits	7762

Signature	7863



	Successor		Predecessor

	For the		For the		For the
	five months		four months		nine months
	ended September 30,		ended April 30,		ended September 30,
	2021		2021		2020

Cash flows provided from (used by) operating activities:
Net income (loss)	$	225	$	4,541	$	(352)
Adjustments to reconcile net income (loss) to net cash
provided from (used by) operating activities:
Depreciation and amortization		452		506		1,204
Pension settlement costs		-		-		159
Stock-based compensation expense		8		(1)		3
Amortization of deferred financing costs		-		-		13
Non-cash reorganization items, net		-		(5,467)		85
Other adjustments		(11)		1		3
Deferred income taxes		68		(148)		(100)
Loss on disposal of Northwest Operations		-		-		160
Change in accounts receivable		65		36		63
Change in accounts payable and other liabilities		149		(168)		334
Change in prepaid expenses, income taxes and other assets		27		46		(80)
Net cash provided from (used by) operating activities		983		(654)		1,492

Cash flows provided from (used by) investing activities:
Capital expenditures		(646)		(500)		(825)
Proceeds from sale of Northwest Operations		-		-		1,131
Proceeds on sale of assets		-		9		7
Other		1		1		2
Net cash provided from (used by) investing activities		(645)		(490)		315

Cash flows provided from (used by) financing activities:
Long-term debt principal payments		(8)		(1)		(5)
Proceeds from long-term debt borrowings		-		225		-
Repayment of revolving debt		-		-		(749)
Financing costs paid		-		(4)		(19)
Finance lease obligation payments		(9)		(7)		(18)
Other		-		(16)		-
Net cash provided from (used by) financing activities		(17)		197		(791)

Increase (Decrease) in cash, cash equivalents, and restricted cash		321		(947)		1,016
Cash, cash equivalents, and restricted cash
at the beginning of the period		940		1,887		809
Cash, cash equivalents, and restricted cash at the end of the period	$	1,261	$	940	$	1,825

Supplemental cash flow information:
Cash paid during the period for:
Interest	$	121	$	84	$	548
Income tax payments, net	$	27	$	9	$	6
Reorganization items, net	$	-	$	1,397	$	134


	Predecessor
	December 31, 2020
	Gross Carrying		Accumulated		Net Carrying
($ in millions)	Amount		Amortization		Amount

Other Intangibles:
Customer base	$	4,332	$	(3,781)	$	551
Trade name		122		-		122
Royalty agreement		72		(68)		4
Total other intangibles	$	4,526	$	(3,849)	$	677



	Successor
	September 30, 2021
	Gross Carrying		Accumulated		Net Carrying
($ in millions)	Amount		Amortization		Amount

Other Intangibles:
Customer Relationships - Business	$	800	$	(30)	$	770
Customer Relationships - Wholesale		3,491		(91)		3,400
Trademarks & Tradenames		150		(13)		137
Total other intangibles	$	4,441	$	(134)	$	4,307


2017 EIP
		Weighted
		Average
	Number of	Grant Date		Aggregate
	Shares	Fair Value		Fair Value
	(in thousands)	(per share)		(in millions)
Balance at January 1, 2021 (Predecessor)	304	$	6.78	$	-
Restricted stock granted	-	$	-	$	-
Restricted stock vested	(41)	$	8.23	$	-
Restricted stock forfeited	(109)	$	8.23
Balance at April 30, 2021 (Predecessor)	154	$	5.38	$	-
Cancellation of restricted stock	(154)	$	-	$	-
Balance at April 30, 2021 (Predecessor)	-	$	-	$	-

2021 Incentive Plan
		Weighted
		Average
	Number of	Grant Date		Aggregate
	Shares	Fair Value		Fair Value
	(in thousands)	(per share)		(in millions)
Balance at April 30, 2021 (Successor)	-	$	-	$	-
Restricted stock granted	2,365	$	28.75	$	66
Restricted stock vested	(9)	$	28.75	$	-
Restricted stock forfeited	(42)	$	28.75
Balance at September 30, 2021 (Successor)	2,314	$	28.75	$	65



	As of or for the three months ended September 30,
(Customer, Subscriber, and Employee Metrics in thousands)	2021⁽²⁾		2020 ⁽³⁾		% Change

Customers ⁽⁴⁾
Consumer		3,173		3,306	(4)	%
Business ⁽¹⁾		304		332	(8)	%
Total		3,477		3,638	(4)	%

Consumer Customer Metrics ⁽⁴⁾
Net customer additions (losses)		(23)		(36)	(36)	%
ARPC	$	83.77	$	86.75	(3)	%
Customer Churn		1.64%		1.81%	(9)	%

Broadband Customer Metrics ^{(1) (4)}
Fiber Broadband
Consumer customers		1,292		1,229	5	%
Business customers		95		94	1	%
Consumer net customer additions		29		6	383	%
Consumer customer churn		1.56%		1.80%	(13)	%
Consumer customer ARPU	$	63.35	$	57.58	10	%
Copper Broadband
Consumer customers		1,264		1,381	(8)	%
Business customers		138		157	(12)	%
Consumer net customer additions		(33)		(20)	65	%
Consumer customer churn		1.89%		2.11%	(10)	%
Consumer customer ARPU	$	45.44	$	42.16	8	%

Other Metrics
Employees		15,803		16,302	(3)	%



	Successor		Predecessor

	For the three		For the three months ended September 30, 2020
	months ended		Consolidated		Northwest		Remaining
($ in millions)	September 30, 2021		Frontier		Ops ⁽¹⁾		Properties

Data and Internet services	$	834	$	838	$	-	$	838
Voice services		411		500		-		500
Video services		149		186		-		186
Other		99		103		-		103
Revenue from contracts
with customers		1,493		1,627		-		1,627
Subsidy and other revenue		83		99		-		99
Revenue		1,576		1,726		-		1,726

Operating expenses ⁽²⁾:
Network access
expenses		177		226		-		226
Network related
expenses		413		431		-		431
Selling, general and
administrative
expenses		421		404		-		404
Depreciation and
amortization		273		392		-		392
Restructuring costs and
other charges		8		3		-		3
Total operating expenses	$	1,292	$	1,456	$	-	$	1,456

Operating income		284		270		-		270

Consumer ⁽³⁾		800		865		-		865
Business and wholesale ⁽³⁾		693		762		-		762
Revenue from contracts
with customers		1,493		1,627		-		1,627
Subsidy and other revenue		83		99		-		99
Total revenue	$	1,576	$	1,726	$	-	$	1,726



					Non-GAAP
	Successor		Predecessor		Combined		Predecessor

	For the five		For the four		For the nine		For the nine months ended September 30, 2020
	months ended		months ended		months ended		Consolidated		Northwest		Remaining
($ in millions)	September 30, 2021		April 30, 2021		September 30, 2021		Frontier		Ops ⁽¹⁾		Properties

Data and Internet services	$	1,390	$	1,125	$	2,515	$	2,644	$	102	$	2,542
Voice services		694		647		1,341		1,595		57		1,538
Video services		254		223		477		608		13		595
Other		161		125		286		328		12		316
Revenue from contracts
with customers		2,499		2,120		4,619		5,175		184		4,991
Subsidy and other revenue		138		111		249		285		8		277
Revenue		2,637		2,231		4,868		5,460		192		5,268

Operating expenses ⁽²⁾:
Network access
expenses		304		264		568		767		14		753
Network related
expenses		682		566		1,248		1,305		26		1,279
Selling, general and
administrative
expenses		690		537		1,227		1,255		26		1,229
Depreciation and
amortization		452		506		958		1,204		-		1,204
Loss on disposal of
Northwest Operations		-		-		-		160		-		160
Restructuring costs
and other charges		19		7		26		87		-		87
Total operating expenses	$	2,147	$	1,880	$	4,027	$	4,778	$	66	$	4,712

Operating income		490		351		841		682		126		556

Consumer ⁽³⁾		1,343		1,133		2,476		2,746		102		2,644
Business and
wholesale ⁽³⁾		1,156		987		2,143		2,429		82		2,347
Revenue from contracts
with customers		2,499		2,120		4,619		5,175		184		4,991
Subsidy and other
revenue		138		111		249		285		8		277
Total revenue	$	2,637	$	2,231	$	4,868	$	5,460	$	192	$	5,268