Frontier Communications
3 High Ridge Park
Stamford, CT 06905
203.614.5600
www.Frontier.com
Contact:
David Whitehouse
Senior Vice President & Treasurer
203.614.5708
david.whitehouse@frontiercorp.com
Frontier Communications Reports Solid Fourth-Quarter
and Full Year Results for 2008
* 2008 full year free cash flow of $493 million
* 2008 full year operating cash flow margin of 54%
* 2008 full year dividend payout ratio of 65%
* Continued strong operating income and cash flow margins
* Data and internet services revenue up 11% year over year
Stamford, Conn., February 25, 2009 -- Frontier Communications (NYSE:FTR) today
reported fourth-quarter 2008 revenue of $547.4 million, operating income of
$151.9 million and net income of $34.3 million.
"Frontier delivered another solid quarter of financial and operating results,"
said Maggie Wilderotter, Frontier Communications Chairman and CEO. "Despite the
continued economic uncertainty in our markets, our fundamental approach to how
we run our business; focusing on customer revenue growth, increasing customer
loyalty, delivering best in class margins, and creating long term value for
shareholders has not changed. Furthermore, consistent with the guidance we gave
twelve months ago, we delivered full year operating cash flow margins of 54%,
free cash flow of $493 million and a comfortable dividend payout ratio of 65%
which demonstrates our ability to execute on our strategy and deliver promised
results. Most important, our Q1 2009 marketing promotions are delivering strong
results for both video and high speed bundle sales. We are off to a solid start
for the year."
Revenue for the fourth quarter of 2008 was $547.4 million compared to $577.2
million in the fourth quarter of 2007, a 5 percent decrease. Revenue declined as
a result of lower access lines, partially offset by a 5 percent increase in data
and internet services revenue. Despite the decline in access lines, our customer
revenue, which is all revenue except switched access and subsidy, has declined
by less than 3 percent. The monthly customer revenue per access line has
increased approximately $2.91, or 5%, over the prior year's fourth quarter while
the monthly total revenue per access line has increased $1.49, or 2%, over the
same period, as the Company has continued to successfully sell additional
products and services, partially offset by reductions in regulatory revenue.
Other operating expenses and network access expenses for the fourth quarter of
2008 were $256.6 million as compared to $257.2 million in the fourth quarter of
2007, a 0.2 percent decrease. Expenses in the fourth quarter of 2007 were
favorably impacted by a pension curtailment gain of $14.4 million, resulting
from the freeze placed on certain pension benefits of the former Commonwealth
Telephone Enterprises, Inc. employees. Excluding the non-cash gain in 2007,
other operating expenses and network access expenses declined $15.0 million, or
5.5%, in 2008.
Operating income for the fourth quarter of 2008 was $151.9 million and operating
income margin was 27.8 percent compared to operating income of $174.9 million
and operating income margin of 30.3 percent in the fourth quarter of 2007. The
fourth quarter 2008 decrease of $23.0 million is primarily the result of the
reduction in revenue, partially offset by lower expenses.
The Company lost approximately 42,100 access lines during the fourth quarter of
2008 and had 2,254,300 access lines at December 31, 2008.
The Company added approximately 8,500 net High-Speed Internet customers during
the fourth quarter of 2008 and had 579,900 High-Speed Internet customers at
December 31, 2008. The Company added approximately 7,600 video customers during
the fourth quarter of 2008 and had 119,900 video customers at December 31, 2008.
Capital expenditures were $84.1 million for the fourth quarter of 2008 and
$288.3 million for the full year of 2008.
Free cash flow was $109.1 million for the fourth quarter of 2008 and $493.2
million for the full year of 2008. The Company's dividend represents a payout of
65 percent of free cash flow for the full year of 2008.
During the fourth quarter of 2008, the Company repurchased 327,700 shares of its
common stock for $3.8 million. The Company completed its $200 million authorized
share repurchase program on October 3, 2008 through the repurchase of 17,778,000
shares of its common stock during the full year of 2008.
For the full year of 2009, the Company expects that its capital expenditures
will be within a range of $250.0 million to $270.0 million and its free cash
flow will be within a range of $460.0 million to $485.0 million.
The Company's next regular quarterly cash dividend of $0.25 per share of common
stock will be paid on March 31, 2009 to shareholders of record on March 9, 2009.
The Company expects that dividends paid to stockholders in 2009 will be treated
as dividends for federal income tax purposes. Shareholders are encouraged to
consult with their tax advisors.
The Company uses certain non-GAAP financial measures in evaluating its
performance. These include free cash flow and operating cash flow. A
reconciliation of the differences between free cash flow and operating cash flow
and the most comparable financial measures calculated and presented in
accordance with GAAP is included in the tables that follow. The non-GAAP
financial measures are by definition not measures of financial performance under
GAAP and are not alternatives to operating income or net income reflected in the
statement of operations or to cash flow as reflected in the statement of cash
flows and are not necessarily indicative of cash available to fund all cash flow
needs. The non-GAAP financial measures used by the Company may not be comparable
to similarly titled measures of other companies.
-MORE-
The Company believes that the presentation of non-GAAP financial measures
provides useful information to investors regarding the Company's financial
condition and results of operations because these measures, when used in
conjunction with related GAAP financial measures, (i) together provide a more
comprehensive view of the Company's core operations and ability to generate cash
flow, (ii) provide investors with the financial analytical framework upon which
management bases financial, operational, compensation and planning decisions and
(iii) presents measurements that investors and rating agencies have indicated to
management are useful to them in assessing the Company and its results of
operations. Management uses these non-GAAP financial measures to plan and
measure the performance of its core operations, and its divisions measure
performance and report to management based upon these measures. In addition, the
Company believes that free cash flow and operating cash flow, as the Company
defines them, can assist in comparing performance from period to period, without
taking into account factors affecting cash flow reflected in the statement of
cash flows, including changes in working capital and the timing of purchases and
payments. The Company has shown adjustments to its financial presentations to
exclude $38.7 million in access revenue for the favorable impact of the one-time
carrier dispute settlement in the full year of 2007, $14.4 million in pension
curtailment gain in the fourth quarter and full year of 2007, $7.6 million and
$13.9 million of severance and early retirement costs in the full years of 2008
and 2007, respectively, $4.0 million of severance and early retirement costs in
the fourth quarter of 2008, $2.1 million and $0.8 million of legal settlement
costs and related expenses in the full years of 2008 and 2007, respectively, and
$1.2 million and $0.8 million of legal settlement costs and related expenses in
the fourth quarters of 2008 and 2007, respectively, because the Company believes
that the magnitude of such revenues in 2007 is unusual, and that the magnitude
of such gains and costs in the fourth quarter and full year of 2007 materially
exceeds the comparable gains and costs in the fourth quarter and full year of
2008.
Management uses these non-GAAP financial measures to (i) assist in analyzing the
Company's underlying financial performance from period to period, (ii) evaluate
the financial performance of its business units, (iii) analyze and evaluate
strategic and operational decisions, (iv) establish criteria for compensation
decisions, and (v) assist management in understanding the Company's ability to
generate cash flow and, as a result, to plan for future capital and operational
decisions. Management uses these non-GAAP financial measures in conjunction with
related GAAP financial measures. The Company believes that the non-GAAP
financial measures are meaningful and useful for the reasons outlined above.
While the Company utilizes these non-GAAP financial measures in managing and
analyzing its business and financial condition and believes they are useful to
management and to investors for the reasons described above, these non-GAAP
financial measures have certain shortcomings. In particular, free cash flow does
not represent the residual cash flow available for discretionary expenditures,
since items such as debt repayments and dividends are not deducted in
determining such measure. Operating cash flow has similar shortcomings as
interest, income taxes, capital expenditures, debt repayments and dividends are
not deducted in determining this measure. Management compensates for the
shortcomings of these measures by utilizing them in conjunction with their
comparable GAAP financial measures. The information in this press release should
be read in conjunction with the financial statements and footnotes contained in
our documents filed with the U.S. Securities and Exchange Commission.
-MORE-
About Frontier Communications
Frontier Communications Corporation (NYSE:FTR) offers telephone, video and
internet services in 24 states with approximately 5,700 employees. More
information is available at www.frontier.com.
This press release contains forward-looking statements that are made pursuant to
the safe harbor provisions of The Private Securities Litigation Reform Act of
1995. These statements are made on the basis of management's views and
assumptions regarding future events and business performance. Words such as
"believe," "anticipate," "expect" and similar expressions are intended to
identify forward-looking statements. Forward-looking statements (including oral
representations) involve risks and uncertainties that may cause actual results
to differ materially from any future results, performance or achievements
expressed or implied by such statements. These risks and uncertainties are based
on a number of factors, including but not limited to: reductions in the number
of our access lines and High-Speed Internet subscribers; the effects of
competition from cable, wireless and other wireline carriers (through voice over
internet protocol (VOIP) or otherwise); reductions in switched access revenues
as a result of regulation, competition and/or technology substitutions; the
effects of greater than anticipated competition requiring new pricing, marketing
strategies or new product offerings and the risk that we will not respond on a
timely or profitable basis; the effects of changes in both general and local
economic conditions on the markets we serve, which can impact demand for our
products and services, customer purchasing decisions, collectability of revenue
and required levels of capital expenditures related to new construction of
residences and businesses; our ability to effectively manage service quality;
our ability to successfully introduce new product offerings, including our
ability to offer bundled service packages on terms that are both profitable to
us and attractive to our customers; our ability to sell enhanced and data
services in order to offset ongoing declines in revenue from local services,
switched access services and subsidies; changes in accounting policies or
practices adopted voluntarily or as required by generally accepted accounting
principles or regulators; the effects of ongoing changes in the regulation of
the communications industry as a result of federal and state legislation and
regulation, including potential changes in state rate of return limitations on
our earnings, access charges and subsidy payments, and regulatory network
upgrade and reliability requirements; our ability to effectively manage our
operations, operating expenses and capital expenditures, to pay dividends and to
reduce or refinance our debt; adverse changes in the credit markets and/or in
the ratings given to our debt securities by nationally accredited ratings
organizations, which could limit or restrict the availability of, and/or
increase the cost of financing; the effects of bankruptcies and home
foreclosures, which could result in increased bad debts; the effects of
technological changes and competition on our capital expenditures and product
and service offerings, including the lack of assurance that our ongoing network
improvements will be sufficient to meet or exceed the capabilities and quality
of competing networks; the effects of increased medical, retiree and pension
expenses and related funding requirements; changes in income tax rates, tax
laws, regulations or rulings, and/or federal or state tax assessments; further
declines in the value of our pension plan assets, which could require us to make
contributions to the pension plan beginning in 2010; the effects of state
regulatory cash management policies on our ability to transfer cash among our
subsidiaries and to the parent company; our ability to successfully renegotiate
union contracts expiring in 2009 and thereafter; our ability to pay a $1.00 per
common share dividend annually, which may be affected by our cash flow from
operations, amount of capital expenditures, debt service requirements, cash paid
for income taxes (which will increase in 2009) and our liquidity; the effects of
significantly increased cash taxes in 2009 and thereafter; the effects of any
unfavorable outcome with respect to any of our current or future legal,
governmental or regulatory proceedings, audits or disputes; the possible impact
of adverse changes in political or other external factors over which we have no
control; and the effects of hurricanes, ice storms and other severe weather.
These and other uncertainties related to our business are described in greater
detail in our filings with the Securities and Exchange Commission, including our
reports on Forms 10-K and 10-Q, and the foregoing information should be read in
conjunction with these filings. We do not intend to update or revise these
forward-looking statements to reflect the occurrence of future events or
circumstances.
###
TABLES TO FOLLOW
Frontier Communications Corporation
Consolidated Financial Data (1)
For the quarter ended For the year ended
December 31, December 31,
-------------------------- ---------------------------------
(Amounts in thousands, except % %
per share amounts) 2008 2007 Change 2008 2007 Change
-------------------------------------- ------------------------------------------
Income Statement Data
Revenue $547,392 $ 577,228 -5% $2,237,018 $ 2,288,015 (2) -2%
----------- ------------ ------------ -------------
Network access expenses 54,988 66,601 -17% 222,013 228,242 -3%
Other operating expenses 201,655 190,580 6% 810,748 808,501 0%
Depreciation and amortization 138,815 145,156 -4% 561,801 545,856 3%
----------- ------------ ------------ -------------
Total operating expenses 395,458 402,337 -2% 1,594,562 1,582,599 1%
----------- ------------ ------------ -------------
Operating income 151,934 174,891 -13% 642,456 705,416 -9%
Investment and other income, net (3) 2,874 7,276 -61% 9,334 17,948 -48%
Interest expense 90,731 92,925 -2% 362,634 380,696 -5%
----------- ------------ ------------ -------------
Income before income taxes 64,077 89,242 -28% 289,156 342,668 -16%
Income tax expense 29,779 30,229 -1% 106,496 128,014 -17%
----------- ------------ ------------ -------------
Net income available for common shareholders $ 34,298 $ 59,013 -42% $ 182,660 $ 214,654 -15%
=========== ============ ============ =============
Weighted average shares outstanding 309,634 327,028 -5% 317,501 331,037 -4%
Basic net income per share attributable to
common shareholders (4) $ 0.11 $ 0.18 -39% $ 0.58 $ 0.65 (2) -11%
Other Financial Data
Capital expenditures $ 84,065 $ 113,152 -26% $ 288,264 $ 315,793 -9%
Operating cash flow (5) 295,961 306,451 -3% 1,213,967 1,212,883 0%
Free cash flow (5) 109,079 104,387 4% 493,197 528,005 -7%
Dividends paid 77,835 81,941 -5% 318,437 336,025 -5%
Dividend payout ratio (6) 71% 78% -9% 65% 64% 2%
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises, Inc.
(CTE) for approximately $1.1 billion, and on October 31, 2007, we acquired
Global Valley Networks, Inc. and GVN Services (together GVN) for $62.0
million, and have included the historical results of CTE and GVN from the
dates of acquisition.
(2) Includes the $38.7 million favorable impact of a carrier dispute
settlement, representing $.07 per share.
(3) Includes premium on debt repurchases of $6.3 million and $18.2 million for
the years ended December 31, 2008 and 2007, respectively, and $4.1
million for bridge loan fee for the year ended December 31, 2007.
(4) Calculated based on weighted average shares outstanding.
(5) A reconciliation to the most comparable GAAP measure is presented at the
end of these tables.
(6) Represents dividends paid divided by free cash flow.
1
Frontier Communications Corporation
Consolidated Financial and Operating Data (1)
For the quarter ended For the year ended
December 31, December 31,
-------------------------- % ------------------------------- %
(Amounts in thousands, except operating data) 2008 2007 Change 2008 2007 Change
------------------------------------ -------------------------------------------
Select Income Statement Data
Revenue
Local services $ 205,783 $ 219,977 -6% $ 848,393 $ 875,762 -3%
Data and internet services 153,931 147,292 5% 605,615 543,764 11%
Access services 96,337 113,881 -15% 404,713 479,462 (2) -16%
Long distance services 42,799 45,313 -6% 182,559 180,525 1%
Directory services 27,523 28,910 -5% 113,347 114,586 -1%
Other 21,019 21,855 -4% 82,391 93,916 -12%
----------- ------------ ----------- --------------
Total revenue 547,392 577,228 -5% 2,237,018 2,288,015 -2%
----------- ------------ ----------- --------------
Expenses
Network access expenses 54,988 66,601 -17% 222,013 228,242 -3%
Other operating expenses (3) 201,655 190,580 6% 810,748 808,501 0%
Depreciation and amortization 138,815 145,156 -4% 561,801 545,856 3%
----------- ------------ ----------- --------------
Total operating expenses 395,458 402,337 -2% 1,594,562 1,582,599 1%
----------- ------------ ----------- --------------
Operating Income $ 151,934 $ 174,891 -13% $ 642,456 $ 705,416 -9%
=========== ============ =========== ==============
Other Financial and Operating Data
Revenue:
Residential $ 225,107 $ 240,236 -6% $ 944,786 $ 958,453 -1%
Business 225,948 223,111 1% 887,519 850,100 4%
----------- ------------ ----------- --------------
Total customer revenue 451,055 463,347 -3% 1,832,305 1,808,553 1%
Regulatory (Access services) 96,337 113,881 -15% 404,713 479,462 -16%
----------- ------------ ----------- --------------
Total revenue $ 547,392 $ 577,228 -5% $2,237,018 $ 2,288,015 -2%
=========== ============ =========== ==============
Access lines:
Residential 1,454,268 1,587,930 -8% 1,454,268 1,587,930 -8%
Business 800,065 841,212 -5% 800,065 841,212 -5%
----------- ------------ ----------- --------------
Total access lines 2,254,333 2,429,142 -7% 2,254,333 2,429,142 -7%
=========== ============ =========== ==============
Other data:
Employees 5,671 5,939 -5% 5,671 5,939 -5%
High-Speed Internet (HSI) subscribers(4) 579,943 522,845 11% 579,943 522,845 11%
Video subscribers 119,919 93,596 28% 119,919 93,596 28%
Switched access minutes of use (in millions) 2,365 2,605 -9% 10,027 10,592 -5%
Average monthly total revenue per
access line $ 80.19 $ 78.70 2% $ 83.05 (5) $ 79.94 (6) 4%
Average monthly customer revenue per
access line $ 66.08 $ 63.17 5% $ 68.65 (5) $ 65.00 (5) 6%
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises, Inc.
(CTE) for approximately $1.1 billion, and on October 31, 2007, we acquired
Global Valley Networks, Inc. and GVN Services (together GVN) for $62.0
million, and have included the historical results of CTE and GVN from the
dates of acquisition.
(2) Includes the $38.7 million favorable impact of a carrier dispute
settlement.
(3) Includes severance and early retirement costs of $4.0 million for the
quarter ended December 31, 2008, and $7.6 million and $13.9 million for the
years ended December 31, 2008 and 2007, respectively. Includes pension
curtailment gain of $14.4 million for the quarter and year ended December
31, 2007. Includes legal settlement costs and related expenses of $1.2
million and $0.8 million for the quarters ended December 31, 2008 and 2007,
respectively, and $2.1 million and $0.8 million for the years ended
December 31, 2008 and 2007, respectively.
(4) High-Speed Internet subscribers as of October 1, 2008 have been revised by
516 to 571,430, arising from the CARS billing system conversion.
(5) For the years ended December 31, 2008 and 2007, the calculations exclude
CTE and GVN data.
(6) For the year ended December 31, 2007, the calculation excludes CTE and GVN
data and excludes the $38.7 million favorable one-time impact from the
first quarter 2007 settlement of a switched access dispute. The amount is
$81.50 with the $38.7 million favorable one-time impact from the
settlement.
2
Frontier Communications Corporation
Condensed Consolidated Balance Sheet Data (1)
(Amounts in thousands)
December 31, 2008 December 31, 2007
-------------------- -------------------
ASSETS
------
Current assets:
Cash and cash equivalents $ 163,627 $ 226,466
Accounts receivable and other current assets 304,332 297,688
-------------------- -------------------
Total current assets 467,959 524,154
Property, plant and equipment, net 3,239,973 3,335,244
Other long-term assets 3,180,744 3,396,671
-------------------- -------------------
Total assets $ 6,888,676 $ 7,256,069
==================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Long-term debt due within one year $ 3,857 $ 2,448
Accounts payable and other current liabilities 378,918 443,443
-------------------- -------------------
Total current liabilities 382,775 445,891
Deferred income taxes and other liabilities 1,265,171 1,075,382
Long-term debt 4,721,685 4,736,897
Shareholders' equity 519,045 997,899
-------------------- -------------------
Total liabilities and shareholders' equity $ 6,888,676 $ 7,256,069
==================== ===================
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises, Inc.
(CTE) for approximately $1.1 billion, and on October 31, 2007, we acquired
Global Valley Networks, Inc. and GVN Services (together GVN) for $62.0
million, and have included the historical results of CTE and GVN from the
dates of acquisition.
3
Frontier Communications Corporation
Consolidated Cash Flow Data (1)
(Amounts in thousands)
For the year ended December 31,
-----------------------------------------
2008 2007
----------------- -------------------
Cash flows provided by (used in) operating activities:
Net income $ 182,660 $ 214,654
Adjustments to reconcile income to net cash provided
by operating activities:
Depreciation and amortization expense 561,801 545,856
Stock based compensation expense 7,788 9,022
Loss on extinguishment of debt 6,290 20,186
Other non-cash adjustments (7,044) (7,598)
Deferred income taxes 33,967 81,011
Legal settlement - (7,905)
Change in accounts receivable 9,746 (4,714)
Change in accounts payable and other liabilities (52,047) (36,257)
Change in other current assets (3,895) 7,428
----------------- -------------------
Net cash provided by operating activities 739,266 821,683
Cash flows provided from (used by) investing activities:
Capital expenditures (288,264) (315,793)
Cash paid for acquisitions, net - (725,548)
Other assets (purchased) distributions received, net 5,489 6,629
----------------- -------------------
Net cash used by investing activities (282,775) (1,034,712)
Cash flows provided from (used by) financing activities:
Long-term debt borrowings 135,000 950,000
Long-term debt payments (142,480) (946,070)
Settlement of interest rate swaps 15,521 -
Financing costs paid (857) (12,196)
Premium paid to retire debt (6,290) (20,186)
Issuance of common stock 1,398 13,808
Common stock repurchased (200,000) (250,000)
Dividends paid (318,437) (336,025)
Repayment of customer advances for construction (3,185) (942)
----------------- -------------------
Net cash used by financing activities (519,330) (601,611)
Decrease in cash and cash equivalents (62,839) (814,640)
Cash and cash equivalents at January 1, 226,466 1,041,106
----------------- -------------------
Cash and cash equivalents at December 31, $ 163,627 $ 226,466
================= ===================
Cash paid during the period for:
Interest $ 365,858 $ 364,381
Income taxes $ 78,878 $ 54,407
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises, Inc.
(CTE) for approximately $1.1 billion, and on October 31, 2007, we acquired
Global Valley Networks, Inc. and GVN Services (together GVN) for $62.0
million, and have included the historical results of CTE and GVN from the
dates of acquisition.
4
Schedule A
Reconciliation of Non-GAAP Financial Measures (1)
For the quarter ended December 31, For the year ended December 31,
----------------------------------- ----------------------------------
(Amounts in thousands) 2008 2007 2008 2007
----------------- ---------------- --------------- -----------------
Net Income to Free Cash Flow;
------------------------------
Net Cash Provided by Operating Activities
-----------------------------------------
Net income $ 34,298 $ 59,013 $ 182,660 $ 214,654
Add back:
Depreciation and amortization 138,815 145,156 561,801 545,856
Income tax expense 29,779 30,229 106,496 128,014
Stock based compensation (1,423) 1,213 7,788 9,022
Subtract:
Cash paid for income taxes 8,704 737 78,878 54,407
Pension curtailment gain (non-cash) - 14,379 - 14,379
Other income (loss), net (2) (379) 2,956 (1,594) (15,038)
Capital expenditures 84,065 113,152 288,264 315,793
----------------- ---------------- --------------- -----------------
Free cash flow 109,079 104,387 493,197 528,005 (3)
Add back:
Deferred income taxes 45,007 26,887 33,967 81,011
Non-cash (gains)/losses, net (1,355) (18,990) 7,034 21,610
Other income (loss), net (2) (379) 2,956 (1,594) (15,038)
Pension curtailment gain (non-cash) - 14,379 - 14,379
Cash paid for income taxes 8,704 737 78,878 54,407
Capital expenditures 84,065 113,152 288,264 315,793
Subtract:
Changes in current assets and liabilities (25,411) (56,353) 46,196 41,448
Income tax expense 29,779 30,229 106,496 128,014
Stock based compensation (1,423) 1,213 7,788 9,022
----------------- ---------------- --------------- -----------------
Net cash provided by operating activities $ 242,176 $ 268,419 $ 739,266 $ 821,683
================= ================ =============== =================
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises, Inc.
(CTE) for approximately $1.1 billion, and on October 31, 2007, we acquired
Global Valley Networks, Inc. and GVN Services (together GVN) for $62.0
million, and have included the historical results of CTE and GVN from the
dates of acquisition.
(2) Includes premium on debt repurchases of $6.3 million and $18.2 million for
the years ended December 31, 2008 and 2007, respectively, and $4.1 million
for bridge loan fee for the year ended December 31, 2007.
(3) Includes the $38.7 million favorable impact of a carrier dispute
settlement.
5
Reconciliation of Non-GAAP Financial Measures (1) Schedule B
(Amounts in thousands) For the quarter ended December 31, 2008 For the quarter ended December 31, 2007
-------------------------------------------------- --------------------------------------------------
Severance
and Early Legal Pension Legal
Operating Cash Flow and As Retirement Settlement As As Curtailment Settlement As
Operating Cash Flow Margin Reported Costs Costs Adjusted Reported Gain Costs Adjusted
------------ ------------ ----------- ----------- ------------ ----------- ------------ ------------
Operating Income $151,934 $ (4,000) $ (1,212) $157,146 $ 174,891 $ 14,379 $ (783) $ 161,295
Add back:
Depreciation and
amortization 138,815 - - 138,815 145,156 - - 145,156
----------- ------------ ----------- ----------- ----------- ----------- ------------ ------------
Operating cash flow $290,749 $ (4,000) $ (1,212) $295,961 $ 320,047 $ 14,379 $ (783) $ 306,451
=========== ============ =========== =========== =========== =========== ============ ============
Revenue $547,392 $547,392 $ 577,228 $ 577,228
=========== =========== =========== ============
Operating income margin
(Operating income
dividend by revenue) 27.8% 28.7% 30.3% 27.9%
=========== =========== =========== ============
Operating cash flow margin
(Operating cash flow
dividend by revenue) 53.1% 54.1% 55.4% 53.1%
=========== =========== =========== ============
For the year ended December 31, 2008
---------------------------------------------------
Severance
and Early Legal
Operating Cash Flow and As Retirement Settlement As
Operating Cash Flow Margin Reported Costs Costs Adjusted
----------- ------------ ----------- -------------
Operating Income $ 642,456 $ (7,597) $ (2,113) $ 652,166
Add back:
Depreciation and
amortization 561,801 - - 561,801
----------- ------------ ----------- -------------
Operating cash flow $1,204,257 $ (7,597) $ (2,113) $1,213,967
=========== ============ =========== =============
Revenue $2,237,018 $2,237,018
=========== =============
Operating income margin
(Operating income
dividend by revenue) 28.7% 29.2%
=========== =============
Operating cash flow margin
(Operating cash flow
dividend by revenue) 53.8% 54.3%
=========== =============
For the year ended December 31, 2007
-----------------------------------------------------------------------------------
Severance
Carrier and Early Pension Legal
Operating Cash Flow and As Dispute Retirement Curtailment Settlement As
Operating Cash Flow Margin Reported Settlement Costs Gain Costs Adjusted
------------- ----------- ------------ ------------- ------------- --------------
Operating Income $ 705,416 $ 38,700 $ (13,874) $ 14,379 $ (816) $ 667,027
Add back:
Depreciation and
amortization 545,856 - - - - 545,856
------------- ----------- ------------ ------------- ------------- --------------
Operating cash flow $1,251,272 $ 38,700 $ (13,874) $ 14,379 $ (816) $ 1,212,883
============= =========== ============ ============= ============= ==============
Revenue $2,288,015 $ 38,700 $ 2,249,315
============= =========== ==============
Operating income margin
(Operating income
dividend by revenue) 30.8% 29.7%
============= ==============
Operating cash flow margin
(Operating cash flow
dividend by revenue) 54.7% 53.9%
============= ==============
(1) On March 8, 2007, we acquired Commonwealth Telephone Enterprises, Inc.
(CTE) for approximately $1.1 billion, and on October 31, 2007, we acquired
Global Valley Networks, Inc. and GVN Services (together GVN) for $62.0
million, and have included the historical results of CTE and GVN from the
dates of acquisition.
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