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 Second-Quarter Results
* 13,800 High-Speed Internet additions
* 11,400 DISH Network video customer additions
* Continued strong operating income and cash flow margins
* First half free cash flow of $244 million
* First half operating cash flow margin of 54%, as adjusted
* First half dividend payout ratio of 64%
* Data and internet services revenue up 6% year over year
* 2009 free cash flow estimate unchanged
Stamford, Conn., August 4, 2009 -- Frontier Communications (NYSE:FTR) today
reported second-quarter 2009 revenue of $532.1 million, operating income of
$136.6 million and net income attributable to common shareholders of Frontier of
$27.9 million.
"I am very pleased with the strong results that Frontier delivered this
quarter," said Maggie Wilderotter, Frontier Communications Chairman and CEO. "We
continue to focus on customer acquisition and retention as our primary goal. Our
access line trends continued to improve for the fourth consecutive quarter, with
absolute access line losses at their lowest level in over two years.
Furthermore, our ability to deliver impressive results in our core business
while also executing on the Verizon acquisition speaks to the strength and
bandwidth of our management team."
Revenue for the second quarter of 2009 was $532.1 million compared to $562.6
million in the second quarter of 2008, a 5 percent decrease. Revenue declined as
a result of lower access lines and reduced long distance, switched access and
subsidy revenue, partially offset by a 6 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 4 percent. The monthly customer revenue per access line has increased
approximately $2.19, or 3%, over the prior year's second quarter while the
monthly total revenue per access line has increased $1.18, 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.
-MORE-
Other operating expenses and network access expenses for the second quarter of
2009 were $252.0 million as compared to $256.3 million in the second quarter of
2008, a 2 percent decrease. Expenses in the second quarter of 2009 include
non-cash pension costs of $8.2 million, as compared to $(0.5) million in the
second quarter of 2008. Excluding these costs, other operating expenses and
network access expenses declined $13.1 million, or 5%, in 2009.
Consistent with recently adopted new accounting rules under SFAS No. 141R,
"Business Combinations," acquisition related costs of approximately $10.8
million ($0.02 per share after tax) were incurred and expensed during the second
quarter of 2009 in connection with our previously announced pending acquisition
of approximately 4.8 million access lines (as of December 31, 2008) from Verizon
Communications Inc.
Operating income for the second quarter of 2009 was $136.6 million and operating
income margin was 25.7 percent compared to operating income of $162.0 million
and operating income margin of 28.8 percent in the second quarter of 2008. The
second quarter 2009 decrease of $25.4 million is primarily the result of the
reduction in revenue and the acquisition related costs incurred in 2009,
partially offset by lower expenses.
Investment and other income, net for the second quarter of 2009 reflects a net
gain of $3.7 million recognized on repurchases of Company debt. As of June 30,
2009, we retired early approximately $311.7 million principal amount of debt for
$308.0 million.
Interest expense for the second quarter of 2009 was $98.7 million as compared to
$90.7 million in the second quarter of 2008, an $8.0 million or 9 percent
increase ($0.02 per share after tax). Interest expense increased due to the
registered offering, completed in April 2009, of $600.0 million aggregate
principal amount of 8.25% senior unsecured notes due 2014. We received net
proceeds of approximately $538.8 million from the offering which we intend to
use to reduce, repurchase or refinance our indebtedness or for general corporate
purposes.
The decrease in income tax expense reflects lower taxable income in 2009,
partially offset by the favorable impact in the second quarter of 2008 of the
reversal of $7.5 million in income tax reserves.
Net income attributable to common shareholders of Frontier was $27.9 million, or
$0.09 per share, as compared to $55.8 million, or $0.17 per share, in the second
quarter of 2008. The second quarter of 2009 includes acquisition related costs
of $10.8 million ($6.8 million or $0.02 per share after tax). The second quarter
2009 decrease is primarily the result of a reduction in operating income and
increased interest expense, partially offset by lower income tax expense.
The Company lost approximately 27,700 access lines during the second quarter of
2009 and had 2,189,100 access lines at June 30, 2009.
The Company added approximately 13,800 net High-Speed Internet customers during
the second quarter of 2009 and had 613,800 High-Speed Internet customers at June
30, 2009. The Company added approximately 11,400 video customers during the
second quarter of 2009 and had 157,400 video customers at June 30, 2009.
Capital expenditures were $55.8 million for the second quarter of 2009 and
$110.4 million for the first six months of 2009.
-MORE-
Operating cash flow, as adjusted, was $288.4 million for the second quarter of
2009 resulting in an operating cash flow margin of 54.2 percent. Operating cash
flow, as reported, of $269.4 million has been adjusted to exclude $10.8 million
of acquisition related costs and $8.2 million of non-cash pension costs for the
second quarter of 2009.
Free cash flow was $98.1 million for the second quarter of 2009 and $244.2
million for the first six months of 2009. The Company's dividend represents a
payout of 64 percent of free cash flow for the first six months of 2009.
For the full year of 2009, the Company maintains its previously reported
expectations that capital expenditures, excluding acquisition related capital
expenditures, will be within a range of $250.0 million to $270.0 million and
free cash flow, excluding acquisition related costs, will be within a range of
$460.0 million to $485.0 million.
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.
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 $10.8 million of acquisition related costs in the second quarter and
first six months of 2009, and $8.2 million and $(0.5) million of non-cash
pension costs in the second quarters of 2009 and 2008, respectively, and $16.5
million and $(1.1) million of non-cash pension costs in the first half of 2009
and 2008, respectively, because the Company believes that such costs in the
second quarters and first six months of 2009 and 2008 are unusual, and that the
magnitude of such costs in the second quarter and first six months of 2009
materially exceed the comparable costs in the second quarter and first six
months of 2008. In addition, the Company has shown adjustments to its financial
presentations to exclude $0.5 million of severance and early retirement costs in
the second quarter of 2008, $2.6 million and $3.4 million of severance and early
retirement costs in the first half of 2009 and 2008, respectively, and $0.1
million and $0.9 million of legal settlement costs and related expenses in the
second quarter and first six months of 2008, respectively, because investors
have indicated to management that such adjustments are useful to them in
assessing the Company and its results of operations.
-MORE-
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.
About Frontier Communications
Frontier Communications Corporation (NYSE:FTR) offers telephone, video and
internet services in 24 states with approximately 5,400 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: Our ability to complete
the acquisition of access lines from Verizon; the failure to obtain, delays in
obtaining or adverse conditions contained in any required regulatory approvals
for the Verizon transaction; the failure to receive the IRS ruling approving the
tax-free status of the Verizon transaction; the failure of our stockholders to
approve the Verizon transaction; the ability to successfully integrate the
Verizon operations into Frontier's existing operations; the effects of increased
expenses due to activities related to the Verizon transaction; the ability to
migrate Verizon's West Virginia operations from Verizon owned and operated
systems and processes to Frontier owned and operated systems and processes
successfully; the risk that the growth opportunities and cost synergies from the
Verizon transaction may not be fully realized or may take longer to realize than
expected; the sufficiency of the assets to be acquired from Verizon to enable us
to operate the acquired business; disruption from the Verizon transaction making
it more difficult to maintain relationships with customers, employees or
suppliers; the effects of greater than anticipated competition requiring new
pricing, marketing strategies or new product or service offerings and the risk
that we will not respond on a timely or profitable basis; reductions in the
number of our access lines and High-Speed Internet subscribers; our ability to
sell enhanced and data services in order to offset ongoing declines in revenue
from local services, switched access services and subsidies; the effects of
ongoing changes in the regulation of the communications industry as a result of
federal and state legislation and regulation; the effects of competition from
cable, wireless and other wireline carriers (through voice over internet
protocol (VOIP) or otherwise); our ability to adjust successfully to changes in
the communications industry and to implement strategies for improving growth;
adverse changes in the credit markets or in the ratings given to our debt
securities by nationally accredited ratings organizations, which could limit or
restrict the availability, or increase the cost, of financing; reductions in
switched access revenues as a result of regulation, competition and/or
technology substitutions; 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; changes in accounting policies or practices
adopted voluntarily or as required by generally accepted accounting principles
or regulators; our ability to effectively manage our operations, operating
expenses and capital expenditures, to pay dividends and to repay, reduce or
refinance our debt; the effects of bankruptcies and home foreclosures, which
-MORE-
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; 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; further declines in the value
of our pension plan assets, which could require us to make contributions to the
pension plan beginning no earlier than 2010; our ability to pay dividends in
respect of our common shares, 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 or 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.
Additional Information and Where to Find it
This press release is not a substitute for the prospectus/proxy statement
included in the Registration Statement on Form S-4 that Frontier filed with the
SEC on July 24, 2009 in connection with the proposed transactions described in
the prospectus/proxy statement. We urge investors to read the prospectus/proxy
statement, which contains important information, including detailed risk
factors, and any amendments thereto when they become available. The
prospectus/proxy statement and other documents filed or to be filed by Frontier
with the SEC are or will be available free of charge at the SEC's website,
www.sec.gov, or by directing a request when such a filing is made to Frontier, 3
High Ridge Park, Stamford, CT 06905-1390, Attention: Investor Relations.
This communication shall not constitute an offer to sell or the solicitation of
an offer to buy securities, nor shall there be any sale of securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of such jurisdiction.
Frontier and certain of its directors, executive officers and other members of
management and employees may, under SEC rules, be deemed to be "participants" in
the solicitation of proxies in connection with the proposed transactions.
Information about the directors and executive officers of Frontier is set forth
in the Registration Statement on Form S-4 referred to above. Investors may
obtain additional information regarding the interests of such participants in
the proposed transactions by reading the prospectus/proxy statement and any
amendments thereto when they become available.
###
TABLES TO FOLLOW
Frontier Communications Corporation
Consolidated Financial Data
For the quarter ended For the six months ended
June 30, June 30,
----------------------------- % ------------------------------ %
(Amounts in thousands, except per share amounts) 2009 2008 Change 2009 2008 Change
------------------------------------- ---------------------------------------
Income Statement Data
Revenue $ 532,142 $ 562,550 -5% $ 1,070,098 $ 1,131,755 -5%
------------- ------------ ------------- -------------
Network access expenses 59,203 53,998 10% 119,887 114,547 5%
Other operating expenses 192,754 202,333 -5% 392,958 405,597 -3%
Depreciation and amortization 132,818 144,250 -8% 270,376 285,330 -5%
Acquisition related costs 10,751 - 100% 10,751 - 100%
------------- ------------ ------------- -------------
Total operating expenses 395,526 400,581 -1% 793,972 805,474 -1%
------------- ------------ ------------- -------------
Operating income 136,616 161,969 -16% 276,126 326,281 -15%
Investment and other income, net (1) 4,618 6,841 -32% 12,865 5,934 117%
Interest expense 98,670 90,710 9% 187,419 181,570 3%
------------- ------------ ------------- -------------
Income before income taxes 42,564 78,100 -46% 101,572 150,645 -33%
Income tax expense 14,254 21,874 -35% 36,307 48,502 -25%
------------- ------------ ------------- -------------
Net income 28,310 56,226 -50% 65,265 102,143 -36%
Less: Income attributable to the noncontrolling
interest in a partnership 392 448 -13% 1,044 776 35%
------------- ------------ ------------- -------------
Net income attributable to common shareholders
of Frontier $ 27,918 $ 55,778 -50% $ 64,221 $ 101,367 -37%
============= ============ ============= =============
Weighted average shares outstanding 310,095 320,838 -3% 309,943 323,340 -4%
Basic net income per share attributable to
common shareholders of Frontier (2) $ 0.09 $ 0.17 -47% $ 0.20 $ 0.31 -35%
Other Financial Data
Capital expenditures $ 55,792 $ 75,737 -26% $ 110,364 $ 123,723 -11%
Operating cash flow, as adjusted (3) 288,404 306,206 -6% 576,274 614,781 -6%
Free cash flow (3) 98,079 96,085 2% 244,227 268,365 -9%
Dividends paid 78,099 80,221 -3% 156,184 162,324 -4%
Dividend payout ratio (4) 80% 83% -4% 64% 60% 7%
(1) Includes gain on debt repurchases of $3.7 million for the quarter and six
months ended June 30, 2009, and premium on debt repurchases of $6.3 million
for the six months ended June 30, 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 on a retrospective basis.
(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 For the six months ended
June 30, June 30,
------------------------------- % -------------------------------- %
(Amounts in thousands, except operating data) 2009 2008 Change 2009 2008 Change
---------------------------------------- ----------------------------------------
Select Income Statement Data
Revenue
Local services $ 198,296 $ 214,703 -8% $ 399,192 $ 431,861 -8%
Data and internet services 160,551 151,655 6% 316,944 297,637 6%
Access services 87,427 101,003 -13% 177,492 208,821 -15%
Long distance services 40,560 46,912 -14% 81,972 93,365 -12%
Directory services 27,211 29,070 -6% 54,916 57,698 -5%
Other 18,097 19,207 -6% 39,582 42,373 -7%
--------------- ------------ ------------- ----------------
Total revenue 532,142 562,550 -5% 1,070,098 1,131,755 -5%
--------------- ------------ ------------- ----------------
Expenses
Network access expenses 59,203 53,998 10% 119,887 114,547 5%
Other operating expenses (1) 192,754 202,333 -5% 392,958 405,597 -3%
Depreciation and amortization 132,818 144,250 -8% 270,376 285,330 -5%
Acquisition related costs 10,751 - 100% 10,751 - 100%
--------------- ------------ ------------- ----------------
Total operating expenses 395,526 400,581 -1% 793,972 805,474 -1%
--------------- ------------ ------------- ----------------
Operating Income $ 136,616 $ 161,969 -16% $ 276,126 $ 326,281 -15%
=============== ============ ============= ================
Other Financial and Operating Data
Revenue:
Residential $ 227,580 $ 239,633 -5% $ 458,046 $ 480,995 -5%
Business 217,135 221,914 -2% 434,560 441,939 -2%
--------------- ------------ ------------- ----------------
Total customer revenue 444,715 461,547 -4% 892,606 922,934 -3%
Regulatory (Access services) 87,427 101,003 -13% 177,492 208,821 -15%
--------------- ------------ ------------- ----------------
Total revenue $ 532,142 $ 562,550 -5% $1,070,098 $ 1,131,755 -5%
=============== ============ ============= ================
Access lines:
Residential 1,405,258 1,516,402 -7% 1,405,258 1,516,402 -7%
Business 783,869 824,310 -5% 783,869 824,310 -5%
--------------- ------------ ------------- ----------------
Total access lines 2,189,127 2,340,712 -6% 2,189,127 2,340,712 -6%
=============== ============ ============= ================
Other data:
Employees 5,417 5,734 -6% 5,417 5,734 -6%
High-Speed Internet (HSI) subscribers 613,810 559,345 10% 613,810 559,345 10%
Video subscribers 157,353 107,596 46% 157,353 107,596 46%
Switched access minutes of use (in millions) 2,213 2,538 -13% 4,589 5,141 -11%
Average monthly total revenue per
access line $ 80.52 $ 79.34 2% $ 80.33 $ 79.08 2%
Average monthly customer revenue per
access line $ 67.29 $ 65.10 3% $ 67.01 $ 64.49 4%
(1) Includes severance and early retirement costs of $0.5 million for the
quarter ended June 30, 2008, and $2.6 million and $3.4 million for the six
months ended June 30, 2009 and 2008, respectively. Includes non-cash
pension costs of $8.2 million and $(0.5) million for the quarters ended
June 30, 2009 and 2008, respectively, and $16.5 million and $(1.1) million
for the six months ended June 30, 2009 and 2008, respectively. Includes
legal settlement costs of $0.1 million for the quarter ended June 30, 2008
and $0.9 million for the six months ended June 30, 2008.
2
Frontier Communications Corporation
Condensed Consolidated Balance Sheet Data
(Amounts in thousands)
June 30, 2009 December 31, 2008
--------------------- --------------------
ASSETS
------
Current assets:
Cash and cash equivalents $ 454,102 $ 163,627
Accounts receivable and other current assets 304,919 304,332
--------------------- --------------------
Total current assets 759,021 467,959
Property, plant and equipment, net 3,165,917 3,239,973
Other long-term assets 3,093,246 3,180,744
--------------------- --------------------
Total assets $ 7,018,184 $ 6,888,676
===================== ====================
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Long-term debt due within one year $ 7,266 $ 3,857
Accounts payable and other current liabilities 351,460 378,918
--------------------- --------------------
Total current liabilities 358,726 382,775
Deferred income taxes and other liabilities 1,266,308 1,254,610
Long-term debt 4,944,989 4,721,685
Shareholders' equity 448,161 529,606
--------------------- --------------------
Total liabilities and equity $ 7,018,184 $ 6,888,676
===================== ====================
3
Frontier Communications Corporation
Consolidated Cash Flow Data
(Amounts in thousands)
For the six months ended June 30,
-----------------------------------
2009 2008
--------------- ----------------
Cash flows provided by (used in) operating activities:
Net income $ 65,265 $ 102,143
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization expense 270,376 285,330
Stock based compensation expense 4,561 6,164
Pension expense 16,454 (1,060)
(Gain)/loss on extinguishment of debt (3,664) 6,290
Other non-cash adjustments (1,702) (8,079)
Deferred income taxes 8,319 (8,996)
Change in accounts receivable 10,231 8,039
Change in accounts payable and other liabilities (21,287) (57,537)
Change in other current assets (18,223) 6,561
--------------- ----------------
Net cash provided by operating activities 330,330 338,855
Cash flows provided from (used by) investing activities:
Capital expenditures (110,364) (123,723)
Other assets (purchased) distributions received, net 628 (1,277)
--------------- ----------------
Net cash used by investing activities (109,736) (125,000)
Cash flows provided from (used by) financing activities:
Long-term debt borrowings 538,830 135,000
Long-term debt payments (309,954) (130,281)
Settlement of interest rate swaps - 15,521
Financing costs paid (911) (857)
Premium paid to retire debt - (6,290)
Issuance of common stock 680 955
Common stock repurchased - (112,659)
Dividends paid (156,184) (162,324)
Repayment of customer advances for construction and distributions
to noncontrolling interests (2,580) (512)
--------------- ----------------
Net cash provided from (used by) financing activities 69,881 (261,447)
Increase (decrease) in cash and cash equivalents 290,475 (47,592)
Cash and cash equivalents at January 1, 163,627 226,466
--------------- ----------------
Cash and cash equivalents at June 30, $ 454,102 $ 178,874
=============== ================
Cash paid during the period for:
Interest $ 181,066 $ 184,552
Income taxes $ 40,458 $ 49,585
4
Schedule A
Reconciliation of Non-GAAP Financial Measures
For the quarter ended June 30, For the six months ended June 30,
------------------------------ -------------------------------------
(Amounts in thousands) 2009 2008 2009 2008
--------------- -------------- ------------------ ----------------
Net Income to Free Cash Flow;
-----------------------------
Net Cash Provided by Operating Activities
-----------------------------------------
Net income $ 28,310 $ 56,226 $ 65,265 $ 102,143
Add back:
Depreciation and amortization 132,818 144,250 270,376 285,330
Income tax expense 14,254 21,874 36,307 48,502
Acquisition related costs 10,751 - 10,751 -
Pension expense (non-cash) (1) 8,208 (530) 16,454 (1,060)
Stock based compensation 2,439 3,145 4,561 6,164
Subtract:
Cash paid for income taxes 39,203 47,726 40,458 49,585
Other income (loss), net (2) 3,706 5,417 8,665 (594)
Capital expenditures 55,792 75,737 110,364 123,723
--------------- --------------- -------------------- ----------------
Free cash flow 98,079 96,085 244,227 268,365
Add back:
Deferred income taxes 4,194 (8,714) 8,319 (8,996)
Non-cash (gains)/losses, net 9,040 (3,723) 15,649 3,315
Other income (loss), net (2) 3,706 5,417 8,665 (594)
Cash paid for income taxes 39,203 47,726 40,458 49,585
Capital expenditures 55,792 75,737 110,364 123,723
Subtract:
Changes in current assets and liabilities (8,893) (9,305) 29,279 42,937
Income tax expense 14,254 21,874 36,307 48,502
Acquisition related costs 10,751 - 10,751 -
Pension expense (non-cash) (1) 8,208 (530) 16,454 (1,060)
Stock based compensation 2,439 3,145 4,561 6,164
--------------- --------------- -------------------- ----------------
Net cash provided by operating activities $ 183,255 $ 197,344 $ 330,330 $ 338,855
=============== =============== ==================== ================
(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 June 30, 2009 and 2008,
respectively, and pension expense of $20.4 million and $(1.3) million, less
amounts capitalized into the cost of capital expenditures of $3.9 million
and $(0.2) million, for the six months ended June 30, 2009 and 2008,
respectively.
(2) Includes gain on debt repurchases of $3.7 million for the quarter and six
months ended June 30, 2009, and premium on debt repurchases of $6.3 million
for the six months ended June 30, 2008.
5
Schedule B
Reconciliation of Non-GAAP Financial Measures
For the quarter ended June 30, 2009
------------------------------------------------------------------
(Amounts in thousands)
Severance
Acquisition and Early Non-cash
Operating Cash Flow and As Related Retirement Pension As
Operating Cash Flow Margin Reported Costs Costs Costs (1) Adjusted
------------ ------------ ------------ ----------- ------------
Operating Income $ 136,616 $ (10,751) $ (11) $ (8,208) $ 155,586
Add back:
Depreciation and
amortization 132,818 - - - 132,818
------------ ------------ ------------ ----------- ------------
Operating cash flow $ 269,434 $ (10,751) $ (11) $ (8,208) $ 288,404
============ ============ ============ =========== ============
Revenue $ 532,142 $ 532,142
============ ============
Operating income margin
(Operating income
divided by revenue) 25.7% 29.2%
============ ============
Operating cash flow margin
(Operating cash flow
divided by revenue) 50.6% 54.2%
============ ============
For the quarter ended June 30, 2008
----------------------------------------------------------------------
Severance
and Early Non-cash Legal
Operating Cash Flow and As Retirement Pension Settlement As
Operating Cash Flow Margin Reported Costs Costs (1) Costs Adjusted
------------ ------------ ----------- ------------ ----------------
Operating Income $ 161,969 $ (480) $ 530 $ (37) $ 161,956
Add back:
Depreciation and
amortization 144,250 - - - 144,250
------------ ------------ ----------- ------------ ----------------
Operating cash flow $ 306,219 $ (480) $ 530 $ (37) $ 306,206
============ ============ =========== ============ ================
Revenue $ 562,550 $ 562,550
============ ================
Operating income margin
(Operating income
divided by revenue) 28.8% 28.8%
============ ================
Operating cash flow margin
(Operating cash flow
divided by revenue) 54.4% 54.4%
============ ================
6
Schedule B (continued)
For the six months ended June 30, 2009
---------------------------------------------------------------------------
Severance
Acquisition and Early Non-cash
Operating Cash Flow and As Related Retirement Pension As
Operating Cash Flow Margin Reported Costs Costs Costs (1) Adjusted
------------ -------------- --------------- -------------- --------------
Operating Income $ 276,126 $ (10,751) $ (2,567) $(16,454) $ 305,898
Add back:
Depreciation and
amortization 270,376 - - - 270,376
------------ -------------- --------------- -------------- --------------
Operating cash flow $ 546,502 $ (10,751) $ (2,567) $(16,454) $ 576,274
============ ============== =============== ============== ==============
Revenue $ 1,070,098 $1,070,098
============ ==============
Operating income margin
(Operating income
divided by revenue) 25.8% 28.6%
============ ==============
Operating cash flow margin
(Operating cash flow
divided by revenue) 51.1% 53.9%
============ ==============
For the six months ended June 30, 2008
---------------------------------------------------------------------------------
Severance
and Early Non-cash Legal
Operating Cash Flow and As Retirement Pension Settlement As
Operating Cash Flow Margin Reported Costs Costs (1) Costs Adjusted
---------------- -------------- -------------- --------------- ----------------
Operating Income $ 326,281 $ (3,371) $ 1,060 $ (859) $ 329,451
Add back:
Depreciation and
amortization 285,330 - - - 285,330
---------------- -------------- -------------- --------------- ----------------
Operating cash flow $ 611,611 $ (3,371) $ 1,060 $ (859) $ 614,781
================ ============== ============== =============== ================
Revenue $1,131,755 $1,131,755
================ ================
Operating income margin
(Operating income
divided by revenue) 28.8% 29.1%
================ ================
Operating cash flow margin
(Operating cash flow 54.0% 54.3%
divided by revenue) ================ ================
(1) Includes pension expense of $10.2 million and $(0.7) million, less amounts
capitalized into the cost of capital expensitures of $2.0 million and
$(0.2) million, for the quarters ended June 30, 2009 and 2008,
respectively, and pension expense of $20.4 million and $(1.3) million, less
amounts capitalized into the cost of capital expenditures of $3.9 million
and $(0.2) million, for the six months ended June 30, 2009 and 2008,
respectively.
7