Exhibit 99.1
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 Strong 2009 First-Quarter Results
* 20,100 High-Speed Internet additions
* 26,100 DISH Network video customer additions
* First quarter free cash flow of $146 million
* First quarter operating cash flow margin of 54%, as adjusted
* First quarter dividend payout ratio of 53%
* Data and internet services revenue up 7% year over year
Stamford, Conn., May 7, 2009 -- Frontier Communications (NYSE:FTR) today
reported first-quarter 2009 revenue of $538.0 million, operating income of
$139.5 million and net income attributable to common shareholders of Frontier of
$36.3 million.
"I am very pleased with Frontier Communication's 2009 first quarter results
bolstered by our "Rolling Thunder" promotional campaign," said Maggie
Wilderotter, Frontier Communications Chairman and CEO. "Frontier surpassed
600,000 High-Speed Internet customers and as of today has surpassed 150,000 DISH
Network video customers. Our first quarter High-Speed growth was the best since
the first quarter of 2008 and our first quarter DISH video growth was equal to
all video subscribers added during the entire year of 2008. We took market share
from our cable competition and we improved our customer churn. Access line
losses improved for the third consecutive quarter."
Revenue for the first quarter of 2009 was $538.0 million compared to $569.2
million in the first quarter of 2008, a 5 percent decrease. Revenue declined as
a result of lower access lines and reduced switched access and subsidy revenue,
partially offset by a 7 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 $2.90, or
5%, over the prior year's first quarter while the monthly total revenue per
access line has increased $1.40, 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 first quarter of
2009 were $260.9 million as compared to $263.8 million in the first quarter of
2008, a 1 percent decrease. Expenses in the first quarter of 2009 include
non-cash pension costs of $8.2 million, as compared to $(0.5) million in the
first quarter of 2008. Excluding these costs, other operating expenses and
network access expenses declined $11.6 million, or 4%, in 2009.
Operating income for the first quarter of 2009 was $139.5 million and operating
income margin was 25.9 percent compared to operating income of $164.3 million
and operating income margin of 28.9 percent in the first quarter of 2008. The
first quarter 2009 decrease of $24.8 million is primarily the result of the
reduction in revenue, partially offset by lower expenses.
Investment and other income (loss), net for the first quarter of 2008 reflects
the premium paid of $6.3 million to repurchase a portion of the Company's 9.25%
Senior Notes due 2011.
The Company lost approximately 37,500 access lines during the first quarter of
2009 and had 2,216,800 access lines at March 31, 2009.
The Company added approximately 20,100 net High-Speed Internet customers during
the first quarter of 2009 and had 600,000 High-Speed Internet customers at March
31, 2009. The Company added approximately 26,100 video customers during the
first quarter of 2009 and had 146,000 video customers at March 31, 2009.
Capital expenditures were $54.6 million for the first quarter of 2009.
Operating cash flow, as adjusted, was $287.9 million for the first quarter of
2009 resulting in an operating cash flow margin of 53.5 percent. Operating cash
flow, as reported, of $277.1 million has been adjusted to exclude $2.6 million
of severance and early retirement costs and $8.2 million of non-cash pension
costs for the first quarter of 2009.
Free cash flow was $146.1 million for the first quarter of 2009. The Company's
dividend represents a payout of 53 percent of free cash flow for the first
quarter of 2009.
For the full year of 2009, the Company maintains its previously reported
expectations that capital expenditures will be within a range of $250.0 million
to $270.0 million and free cash flow will be within a range of $460.0 million to
$485.0 million.
In April 2009, we completed a registered offering of $600.0 million aggregate
principal amount of 8.25% senior unsecured notes due 2014. We received net
proceeds of approximately $539.0 million from the offering which we intend to
use to reduce, repurchase or refinance our indebtedness. As of May 7, 2009 we
have used $206.7 million of the proceeds to repurchase $214.4 million principal
amount of debt.
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 $8.2 million and $(0.5) million of non-cash pension costs in the first
quarters of 2009 and 2008, respectively, because the Company believes that such
costs in the first quarters of 2009 and 2008 are unusual, and that the magnitude
of such costs in the first quarter of 2009 materially exceed the comparable
costs in the first quarter of 2008. In addition, the Company has shown
adjustments to its financial presentations to exclude $2.6 million and $2.9
million of severance and early retirement costs in the first quarters of 2009
and 2008, respectively, and $0.8 million of legal settlement costs and related
expenses in the first quarter of 2008 because investors have indicated to
management that such adjustments are useful to them in assessing the Company and
its results of operations.
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 5,600 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, 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, at the earliest; 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 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
For the quarter ended
March 31,
-------------------------- %
(Amounts in thousands, except per share amounts) 2009 2008 Change
---------------------------------------
Income Statement Data
Revenue $537,956 $569,205 -5%
------------ -----------
Network access expenses 60,684 60,549 0%
Other operating expenses 200,204 203,264 -2%
Depreciation and amortization 137,558 141,080 -2%
------------ -----------
Total operating expenses 398,446 404,893 -2%
------------ -----------
Operating income 139,510 164,312 -15%
Investment and other income (loss), net (1) 8,247 (907) 1009%
Interest expense 88,749 90,860 -2%
------------ -----------
Income before income taxes 59,008 72,545 -19%
Income tax expense 22,053 26,628 -17%
------------ -----------
Net income 36,955 45,917 -20%
Less: Income attributable to the noncontrolling interest in a
partnership 652 328 99%
------------ -----------
Net income attributable to common shareholders of Frontier $ 36,303 $ 45,589 -20%
============ ===========
Weighted average shares outstanding 309,826 326,173 -5%
Basic net income per share attributable to $ 0.12 $ 0.14 -14%
common shareholders of Frontier (2)
Other Financial Data
Capital expenditures $ 54,572 $ 47,986 14%
Operating cash flow, as adjusted (3) 287,870 308,575 -7%
Free cash flow (3) 146,148 172,280 -15%
Dividends paid 78,085 82,103 -5%
Dividend payout ratio (4) 53% 48% 10%
(1) Includes premium on debt repurchases of $6.3 million for the quarter ended
March 31, 2008.
(2) Calculated based on weighted average shares outstanding. FSP EITF No.
03-6-1, "Determining Whether Instruments Granted in Share-Based Payment
Transactions are Participating Securities" was adopted in the first quarter
of 2009.
(3) A reconciliation to the most comparable GAAP measure is presented at the
end of these tables.
(4) Represents dividends paid divided by free cash flow.
1
Frontier Communications Corporation
Consolidated Financial and Operating Data
For the quarter ended
March 31,
-------------------------- %
(Amounts in thousands, except operating data) 2009 2008 Change
---------------------------------------
Select Income Statement Data
Revenue
Local services $ 200,896 $ 217,158 -7%
Data and internet services 156,393 145,982 7%
Access services 90,065 107,818 -16%
Long distance services 41,412 46,453 -11%
Directory services 27,705 28,628 -3%
Other 21,485 23,166 -7%
------------ ------------
Total revenue 537,956 569,205 -5%
------------ ------------
Expenses
Network access expenses 60,684 60,549 0%
Other operating expenses (1) 200,204 203,264 -2%
Depreciation and amortization 137,558 141,080 -2%
------------ ------------
Total operating expenses 398,446 404,893 -2%
------------ ------------
Operating Income $ 139,510 $ 164,312 -15%
============ ============
Other Financial and Operating Data
Revenue:
Residential $ 230,466 $ 241,362 -5%
Business 217,425 220,025 -1%
------------ ------------
Total customer revenue 447,891 461,387 -3%
Regulatory (Access services) 90,065 107,818 -16%
------------ ------------
Total revenue $ 537,956 $ 569,205 -5%
============ ============
Access lines:
Residential 1,427,149 1,553,094 -8%
Business 789,654 832,979 -5%
------------ ------------
Total access lines 2,216,803 2,386,073 -7%
============ ============
Other data:
Employees 5,628 5,828 -3%
High-Speed Internet (HSI) subscribers 600,047 543,020 11%
Video subscribers 146,010 101,410 44%
Switched access minutes of use (in millions) 2,377 2,602 -9%
Average monthly total revenue per
access line $ 80.21 $ 78.81 2%
Average monthly customer revenue per
access line $ 66.78 $ 63.88 5%
(1) Includes severance and early retirement costs of $2.6 million and $2.9
million for the quarters ended March 31, 2009 and 2008, respectively.
Includes non-cash pension costs of $8.2 million and $(0.5) million for the
quarters ended March 31, 2009 and 2008, respectively. Includes legal
settlement costs of $0.8 million for the quarter ended March 31, 2008.
2
Frontier Communications Corporation
Condensed Consolidated Balance Sheet Data
(Amounts in thousands)
March 31, 2009 December 31, 2008
-------------------- -------------------
ASSETS
------
Current assets:
Cash and cash equivalents $ 177,431 $ 163,627
Accounts receivable and other current assets 287,690 304,332
-------------------- -------------------
Total current assets 465,121 467,959
Property, plant and equipment, net 3,201,965 3,239,973
Other long-term assets 3,133,199 3,180,744
-------------------- -------------------
Total assets $ 6,800,285 $ 6,888,676
==================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Long-term debt due within one year $ 3,872 $ 3,857
Accounts payable and other current liabilities 321,885 378,918
-------------------- -------------------
Total current liabilities 325,757 382,775
Deferred income taxes and other liabilities 1,260,630 1,254,610
Long-term debt 4,720,713 4,721,685
Shareholders' equity 493,185 529,606
-------------------- -------------------
Total liabilities and equity $ 6,800,285 $ 6,888,676
==================== ===================
3
Frontier Communications Corporation
Consolidated Cash Flow Data
(Amounts in thousands)
For the three months ended March 31,
-----------------------------------------
2009 2008
----------------- -------------------
Cash flows provided by (used in) operating activities:
Net income $ 36,955 $ 45,917
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization expense 137,558 141,080
Stock based compensation expense 2,122 3,019
Pension expense 8,246 (530)
Loss on extinguishment of debt - 6,290
Other non-cash adjustments (3,759) (1,741)
Deferred income taxes 4,125 (282)
Change in accounts receivable 9,211 19,057
Change in accounts payable and other liabilities (47,409) (69,731)
Change in other current assets 26 (1,568)
----------------- -------------------
Net cash provided by operating activities 147,075 141,511
Cash flows provided from (used by) investing activities:
Capital expenditures (54,572) (47,986)
Other assets (purchased) distributions received, net 158 654
----------------- -------------------
Net cash used by investing activities (54,414) (47,332)
Cash flows provided from (used by) financing activities:
Long-term debt borrowings - 135,000
Long-term debt payments (962) (129,332)
Settlement of interest rate swaps - 15,521
Financing costs paid - (857)
Premium paid to retire debt - (6,290)
Issuance of common stock 680 591
Common stock repurchased - (24,784)
Dividends paid (78,085) (82,103)
Repayment of customer advances for construction (490) (757)
----------------- -------------------
Net cash used by financing activities (78,857) (93,011)
Increase in cash and cash equivalents 13,804 1,168
Cash and cash equivalents at January 1, 163,627 226,466
----------------- -------------------
Cash and cash equivalents at March 31, $ 177,431 $ 227,634
================= ===================
Cash paid during the period for:
Interest $ 116,408 $ 121,396
Income taxes $ 1,255 $ 1,859
4
Schedule A
Reconciliation of Non-GAAP Financial Measures
For the quarter ended March 31,
--------------------------------
(Amounts in thousands) 2009 2008
--------------- ---------------
Net Income to Free Cash Flow;
-----------------------------
Net Cash Provided by Operating Activities
-----------------------------------------
Net income $ 36,955 $ 45,917
Add back:
Depreciation and amortization 137,558 141,080
Income tax expense 22,053 26,628
Pension expense (non-cash) (1) 8,246 (530)
Stock based compensation 2,122 3,019
Subtract:
Cash paid for income taxes 1,255 1,859
Other income (loss), net (2) 4,959 (6,011)
Capital expenditures 54,572 47,986
--------------- ---------------
Free cash flow 146,148 172,280
Add back:
Deferred income taxes 4,125 (282)
Non-cash (gains)/losses, net 6,609 7,038
Other income (loss), net (2) 4,959 (6,011)
Cash paid for income taxes 1,255 1,859
Capital expenditures 54,572 47,986
Subtract:
Changes in current assets and liabilities 38,172 52,242
Income tax expense 22,053 26,628
Pension expense (non-cash) (1) 8,246 (530)
Stock based compensation 2,122 3,019
--------------- ---------------
Net cash provided by operating activities $ 147,075 $ 141,511
=============== ===============
(1) Includes pension expense of $10.2 million and $(0.7) million, less amounts
capitalized into the cost of capital expenditures of $2.0 million and
$(0.2) million, for the quarters ended March 31, 2009 and 2008,
respectively.
(2) Includes premium on debt repurchases of $6.3 million for the quarter ended
March 31, 2008.
5
Schedule B
Reconciliation of Non-GAAP Financial Measures
For the quarter ended March 31, 2009 For the quarter ended March 31, 2008
--------------------------------------------- --------------------------------------------------------
(Amounts in thousands)
Severance Severance
and Early Non-cash and Early Non-cash Legal
Operating Cash Flow and As Retirement Pension As As Retirement Pension Settlement As
Operating Cash Flow Margin Reported Costs Costs (1) Adjusted Reported Costs Costs (1) Costs Adjusted
----------- ----------- ---------- ---------- ---------- ---------- ---------- ----------- ----------
Operating Income $139,510 $ (2,556) $ (8,246) $ 150,312 $ 164,312 $ (2,891) $ 530 $ (822) $ 167,495
Add back:
Depreciation and
amortization 137,558 - - 137,558 141,080 - - - 141,080
----------- ----------- ---------- ---------- ---------- ---------- ---------- ----------- ----------
Operating cash flow $277,068 $ (2,556) $ (8,246) $ 287,870 $ 305,392 $ (2,891) $ 530 $ (822) $ 308,575
=========== =========== ========== ========== ========== ========== ========== =========== ==========
Revenue $537,956 $ 537,956 $ 569,205 $ 569,205
=========== ========== ========== ==========
Operating income margin
(Operating income
dividend by
revenue) 25.9% 27.9% 28.9% 29.4%
=========== ========== ========== ==========
Operating cash flow margin
(Operating cash flow
dividend by
revenue) 51.5% 53.5% 53.7% 54.2%
=========== =========== =========== ==========
(1) Includes pension expense of $10.2 million and $(0.7) million, less amounts
capitalized into the cost of capital expenditures of $2.0 million and
$(0.2) million, for the quarters ended March 31, 2009 and 2008,
respectively.
6