-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VZciypDAE45O3aVTdvJ90m5bJnBboyp82/RBwcCGL2oA0y9/onOWynZotz9SeFJm 5hwM3C2See2QkXgRhre6qg== 0000020520-08-000054.txt : 20080805 0000020520-08-000054.hdr.sgml : 20080805 20080805084626 ACCESSION NUMBER: 0000020520-08-000054 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20080630 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20080805 DATE AS OF CHANGE: 20080805 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRONTIER COMMUNICATIONS CORP CENTRAL INDEX KEY: 0000020520 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 060619596 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11001 FILM NUMBER: 08989767 BUSINESS ADDRESS: STREET 1: HIGH RIDGE PK BLDG 3 CITY: STAMFORD STATE: CT ZIP: 06905 BUSINESS PHONE: 2036145600 MAIL ADDRESS: STREET 1: THREE HIGH RIDGE PARK CITY: STAMFORD STATE: CT ZIP: 06905 FORMER COMPANY: FORMER CONFORMED NAME: CITIZENS COMMUNICATIONS CO DATE OF NAME CHANGE: 20000619 FORMER COMPANY: FORMER CONFORMED NAME: CITIZENS UTILITIES CO DATE OF NAME CHANGE: 19920703 8-K 1 analschedprcover.txt 2ND QTR 2008 PR AND ANALYST SCHEDULES UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (date of earliest event reported): August 5, 2008 Frontier Communications Corporation - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware - -------------------------------------------------------------------------------- (State or other jurisdiction of incorporation) 001-11001 06-0619596 - -------------------------------------------------------------------------------- (Commission File Number) (IRS Employer Identification No.) 3 High Ridge Park, Stamford, Connecticut 06905 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (203) 614-5600 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): | | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 2.02. Results of Operations and Financial Condition --------------------------------------------- On August 5, 2008, the Company issued a press release. A copy of the press release is attached hereto as Exhibit 99.1. The information in this Form 8-K and Exhibit 99.1 attached hereto shall not be deemed "filed" for purposes of Section 18 of the Securities and Exchange Act of 1934 (the "Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing. Item 9.01. Financial Statements and Exhibits --------------------------------- (d) Exhibits 99.1 Press Release of Frontier Communications Corporation released August 5, 2008. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. FRONTIER COMMUNICATIONS CORPORATION Date: August 5, 2008 By: /s/ Robert J. Larson --------------------------------- Robert J. Larson Senior Vice President and Chief Accounting Officer EX-99.1 2 pranalsched2ndqtr08.txt PRESS RELEASE AND ANALYST SCHEDULES Exhibit 99.1 Frontier Communications 3 High Ridge Park Stamford, CT 06905 203.614.5600 Web site: www.frontieronline.com Contact: David Whitehouse Senior Vice President & Treasurer 203.614.5708 david.whitehouse@frontiercorp.com Frontier Communications Reports Solid 2008 Second-Quarter Results with Strong High-Speed Net Additions * 16,300 net high-speed internet additions * Data and internet services revenue up 10% year over year * Continued strong operating income and cash flow margins * First half operating cash flow margin of 54% * First half dividend payout ratio of 60% * 2008 free cash flow estimate unchanged Stamford, Conn., August 5, 2008 -- Frontier Communications (NYSE:FTR) (formerly Citizens Communications, NYSE:CZN) today reported second quarter 2008 revenue of $562.6 million, operating income of $162.0 million, and net income of $55.8 million. "Frontier Communications had another quarter of solid financial and operating results," said Maggie Wilderotter, Chairman and CEO. "Despite a challenging economic environment, our employees did a terrific job of relentlessly focusing on our customers to deliver a strong second quarter performance. Our effective expense management enabled us to achieve an operating cash flow margin of 54.5% for the quarter and a dividend payout ratio of only 60% through the first six months. Finally, we continued to provide returns to our shareholders through dividends and stock repurchases in the first half of the year by applying over 100% of our free cash flow to these activities." Revenue for the second quarter of 2008 was $562.6 million, as compared to $578.8 million in the second quarter of 2007, a 3 percent decrease. Revenue declined as a result of lower local services revenue, subsidy revenue and switched access revenue, partially offset by a 10 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 remained relatively flat overall. The monthly customer revenue per access line has increased approximately $3.50 over the prior year's second quarter while the monthly total revenue per access line has increased $2.78 over the same period. These statistics reflect the Company's success in selling additional products and services to our customer base. Other operating expenses and network access expenses for the second quarter of 2008 were $256.3 million, as compared to $267.1 million in the second quarter of 2007. The decrease of $10.8 million in 2008 as compared to the second quarter of 2007 is primarily the result of reduced expenses attributable to the integration of the back office, customer service and administrative support functions of the Commonwealth and Global Valley operations acquired in 2007. Operating income for the second quarter of 2008 was $162.0 million and operating income margin was 28.8 percent, as compared to operating income of $171.3 million and operating income margin of 29.6 percent in the second quarter of 2007. The second quarter 2008 decrease of $9.3 million is primarily the result of the reduction in revenue. The increase in investment and other income (loss), net reflects the premium paid in the second quarter of 2007 of $16.3 million to redeem the Company's 7.625% Senior Notes due 2008. Income tax expense for the second quarter of 2008 was favorably impacted by the reversal of $7.5 million in income tax reserves. The Company lost approximately 45,400 access lines, of which 6,100 were second lines, during the second quarter of 2008 and had more than 2,341,700 access lines at June 30, 2008. The Company added approximately 16,300 net high-speed internet customers during the second quarter of 2008 and had more than 559,300 high-speed internet customers at June 30, 2008. The Company added approximately 6,200 video customers during the second quarter of 2008 and had more than 107,500 video customers at June 30, 2008. Capital expenditures were $75.7 million for the second quarter of 2008 and $123.7 million for the first six months of 2008. Free cash flow was $96.6 million for the second quarter of 2008 and $269.4 million for the first six months of 2008. The second quarter of 2008 includes increased seasonal payments for income taxes and capital expenditures. The Company's dividend represents a payout of 60 percent of free cash flow for the first six months of 2008. During the second quarter of 2008, the Company repurchased 8,067,000 shares of its common stock for $87.8 million. Through the first half of 2008, the Company repurchased 10,383,000 shares of its common stock for $112.7 million, representing 56 percent of the $200 million share repurchase program. The Company's free cash flow estimate for 2008 remains unchanged at approximately $470.0 million to $495.0 million after calculating the impact that the "Economic Stimulus Act of 2008" will have on its cash paid for income taxes. -MORE- 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 $38.7 million in access revenue for the favorable impact of the one-time carrier dispute settlement in the first half of 2007, $3.4 million and $1.8 million of severance and early retirement costs in the first half of 2008 and 2007, respectively, and $0.5 million and $1.6 million of severance and early retirement costs in the second quarter of 2008 and 2007, respectively, because the Company believes that the magnitude of such revenues in the first half of 2007 is unusual, and such costs in the first half of 2008 materially exceeds the comparable costs in the first half of 2007. 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. -MORE- 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, television and internet services in 24 states with approximately 5,700 employees. More information is available at www.frontieronline.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); 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 general and local economic, business, industry and employment conditions on our revenues; 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 in the telecommunications industry, which could result in potential 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 2008 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 the future) and our liquidity; the effects of significantly increased cash taxes in 2008 and future years; and the effects of any unfavorable outcome with respect to any of our current or future legal, governmental or regulatory proceedings, audits or disputes. 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 six months ended June 30, June 30, -------------------------- % -------------------------------- % (Amounts in thousands, except per share amounts) 2008 2007 Change 2008 2007 Change ----------------------------------- -------------------------------------------- Income Statement Data Revenue $562,550 $578,826 -3% $1,131,755 $ 1,134,973 (2) 0% ----------- ------------ ------------- --------------- Network access expenses 53,998 53,678 1% 114,547 105,075 9% Other operating expenses 202,333 213,388 -5% 405,597 402,655 1% Depreciation and amortization 144,250 140,462 3% 285,330 262,643 9% ----------- ------------ ------------- --------------- Total operating expenses 400,581 407,528 -2% 805,474 770,373 5% ----------- ------------ ------------- --------------- Operating income 161,969 171,298 -5% 326,281 364,600 -11% Investment and other income (loss), net (3) 6,393 (6,517) 198% 5,158 3,500 47% Interest expense 90,710 98,649 -8% 181,570 192,613 -6% ----------- ------------ ------------- --------------- Income before income taxes 77,652 66,132 17% 149,869 175,487 -15% Income tax expense 21,874 25,573 -14% 48,502 67,261 -28% ----------- ------------ ------------- --------------- Net income attributable to common shareholders $ 55,778 $ 40,559 38% $ 101,367 $ 108,226 -6% =========== ============ ============= =============== Weighted average shares outstanding 320,838 340,469 -6% 323,340 332,331 -3% Basic net income per share attributable to common shareholders (4) $ 0.17 $ 0.12 42% $ 0.31 $ 0.33 (2) -6% Other Financial Data Capital expenditures $ 75,737 $ 66,658 14% $ 123,723 $ 111,769 11% Operating cash flow (5) 306,699 313,354 -2% 614,982 590,319 4% Free cash flow (5) 96,615 116,295 -17% 269,425 303,850 -11% Dividends paid 80,221 85,379 -6% 162,324 170,841 -5% Dividend payout ratio (6) 83% 73% 14% 60% 56% 7%
(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 $17.1 million for the quarter ended June 30, 2007, and $6.3 million and $18.2 million for the six months ended June 30, 2008 and 2007, respectively, and $4.0 million for bridge loan fee for the six months ended June 30, 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 six months ended June 30, June 30, ---------------------------- % ----------------------------- % (Amounts in thousands, except operating data) 2008 2007 Change 2008 2007 Change --------------------------------------- ----------------------------------------- Select Income Statement Data Revenue Local services $ 214,703 $ 226,363 (2) -5% $ 431,861 $ 430,807 (2) 0% Data and internet services 151,655 138,243 (2) 10% 297,637 256,267 (2) 16% Access services 101,003 113,429 -11% 208,821 252,453 (3) -17% Long distance services 46,912 47,053 0% 93,365 87,481 7% Directory services 29,070 28,664 1% 57,698 57,334 1% Other 19,207 25,074 -23% 42,373 50,631 -16% ------------- ------------ ------------ --------------- Total revenue 562,550 578,826 -3% 1,131,755 1,134,973 0% ------------- ------------ ------------ --------------- Expenses Network access expenses 53,998 53,678 (2) 1% 114,547 105,075 (2) 9% Other operating expenses (4) 202,333 213,388 (2) -5% 405,597 402,655 (2) 1% Depreciation and amortization 144,250 140,462 3% 285,330 262,643 9% ------------- ------------ ------------ --------------- Total operating expenses 400,581 407,528 -2% 805,474 770,373 5% ------------- ------------ ------------ --------------- Operating Income $ 161,969 $ 171,298 -5% $ 326,281 $ 364,600 -11% ============= ============ ============ =============== Other Financial and Operating Data Revenue: Residential $ 239,633 $ 248,550 -4% $ 480,995 $ 470,328 2% Business 221,914 216,847 2% 441,939 412,192 7% ------------- ------------ ------------ --------------- Total customer revenue 461,547 465,397 -1% 922,934 882,520 5% Regulatory (Access services) 101,003 113,429 -11% 208,821 252,453 -17% ------------- ------------ ------------ --------------- Total revenue $ 562,550 $ 578,826 -3% $1,131,755 $1,134,973 0% ------------- ------------ ------------ --------------- Access lines: Residential 1,516,402 1,654,854 -8% 1,516,402 1,654,854 -8% Business 825,345 848,864 -3% 825,345 848,864 -3% ------------- ------------ ------------ --------------- Total access lines 2,341,747 2,503,718 -6% 2,341,747 2,503,718 -6% ------------- ------------ ------------ --------------- Other data: Employees 5,734 6,224 -8% 5,734 6,224 -8% High-speed internet (HSI) subscribers 559,345 479,317 17% 559,345 479,317 17% Video subscribers 107,596 81,092 33% 107,596 81,092 33% Switched access minutes of use (in millions) 2,538 2,748 -8% 5,141 5,276 -3% Average monthly total revenue per access line $ 79.31 $ 76.53 4% $ 79.04 $ 78.75 (5) 0% Average monthly customer revenue per access line $ 65.07 $ 61.53 6% $ 64.46 $ 64.04 (6) 1%
(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) Reflects a reclassification of $6.3 million and $7.9 million of revenue related to our CTE acquisition from local services to data and internet services for the quarter and six months ended June 30, 2007, respectively. Also, expenses reflect a reclassification of $1.8 million and $2.4 million of expenses related to our CTE acquisition from other operating expenses to network access expenses for the quarter and six months ended June 30, 2007, respectively. (3) Includes the $38.7 million favorable impact of a carrier dispute settlement. (4) Includes severance and early retirement costs of $0.5 million and $1.6 million for the quarter ended June 30, 2008 and 2007, respectively, and $3.4 million and $1.8 million for the six months ended June 30, 2008 and 2007, respectively. (5) For the six months ended June 30, 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 $81.82 with the $38.7 million favorable one-time impact from the settlement. (6) For the six months ended June 30, 2007, the calculation excludes CTE and GVN data. 2
Frontier Communications Corporation Condensed Consolidated Balance Sheet Data (1) (Amounts in thousands) June 30, 2008 December 31, 2007 -------------------- ------------------- ASSETS ------ Current assets: Cash and cash equivalents $ 178,874 $ 226,466 Accounts receivable and other current assets 269,853 297,688 -------------------- ------------------- Total current assets 448,727 524,154 Property, plant and equipment, net 3,265,260 3,335,244 Other long-term assets 3,299,242 3,396,671 -------------------- ------------------- Total assets $ 7,013,229 $ 7,256,069 ==================== =================== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current liabilities: Long-term debt due within one year $ 3,828 $ 2,448 Accounts payable and other current liabilities 368,704 443,443 -------------------- ------------------- Total current liabilities 372,532 445,891 Deferred income taxes and other liabilities 1,063,836 1,075,382 Long-term debt 4,746,612 4,736,897 Shareholders' equity 830,249 997,899 -------------------- ------------------- Total liabilities and shareholders' equity $ 7,013,229 $ 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 six months ended June 30, ----------------------------------------- 2008 2007 ----------------- ------------------- Cash flows provided by (used in) operating activities: Net income $ 101,367 $ 108,226 Adjustments to reconcile income to net cash provided by operating activities: Depreciation and amortization expense 285,330 262,643 Stock based compensation expense 6,164 5,445 Loss on extinguishment of debt 6,290 20,186 Other non-cash adjustments (7,303) 4,760 Deferred income taxes (including FIN 48) (8,996) 28,576 Change in accounts receivable 8,039 4,232 Change in accounts payable and other liabilities (58,597) (71,248) Change in other current assets 6,561 6,736 ----------------- ------------------- Net cash provided by operating activities 338,855 369,556 Cash flows provided from (used by) investing activities: Capital expenditures (123,723) (111,769) Cash paid for Commonwealth acquisition (net of cash acquired) - (657,610) Other assets (purchased) distributions received, net (1,277) 3,851 ----------------- ------------------- Net cash used by investing activities (125,000) (765,528) Cash flows provided from (used by) financing activities: Long-term debt borrowings 135,000 950,000 Long-term debt payments (130,281) (914,516) Settlement of interest rate swaps 15,521 - Financing costs paid (857) (15,753) Premium paid to retire debt (6,290) (16,160) Issuance of common stock 955 11,472 Dividends paid (162,324) (170,841) Common stock repurchased (112,659) (70,730) Repayment of customer advances for construction (512) (506) ----------------- ------------------- Net cash used by financing activities (261,447) (227,034) Decrease in cash and cash equivalents (47,592) (623,006) Cash and cash equivalents at January 1, 226,466 1,041,106 ----------------- ------------------- Cash and cash equivalents at June 30, $ 178,874 $ 418,100 ================= =================== Cash paid during the period for: Interest $ 184,552 $ 176,558 Income taxes $ 49,585 $ 47,426
(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 June 30, For the six months ended June 30, ------------------------------------ ------------------------------------- (Amounts in thousands) 2008 2007 2008 2007 ----------------- ----------------- ----------------- ------------------ Net Income to Free Cash Flow; ----------------------------- Net Cash Provided by Operating Activities ----------------------------------------- Net income $ 55,778 $ 40,559 $ 101,367 $ 108,226 Add back: Depreciation and amortization 144,250 140,462 285,330 262,643 Income tax expense 21,874 25,573 48,502 67,261 Stock based compensation 3,145 2,038 6,164 5,445 Subtract: Cash paid for income taxes 47,726 40,640 49,585 47,426 Other income (loss), net (2) 4,969 (14,961) (1,370) (19,470) Capital expenditures 75,737 66,658 123,723 111,769 ----------------- ----------------- ----------------- ------------------ Free cash flow 96,615 116,295 269,425 303,850 (3) Add back: Deferred income taxes (8,714) 4,962 (8,996) 28,576 Non-cash (gains)/losses, net (2,745) 19,976 5,151 30,391 Other income (loss), net (2) 4,969 (14,961) (1,370) (19,470) Cash paid for income taxes 47,726 40,640 49,585 47,426 Capital expenditures 75,737 66,658 123,723 111,769 Subtract: Changes in current assets and liabilities (8,775) 11,690 43,997 60,280 Income tax expense 21,874 25,573 48,502 67,261 Stock based compensation 3,145 2,038 6,164 5,445 ----------------- ----------------- ----------------- ------------------ Net cash provided by operating activities $ 197,344 $ 194,269 $ 338,855 $ 369,556 ================= ================= ================= ==================
(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 $17.1 million for the quarter ended June 30, 2007, and $6.3 million and $18.2 million for the six months ended June 30, 2008 and 2007, respectively, and $4.0 million for bridge loan fee for the six months ended June 30, 2007. (3) Includes the $38.7 million favorable impact of a carrier dispute settlement. 5
Schedule B Reconciliation of Non-GAAP Financial Measures (1) For the quarter ended June 30, 2008 For the quarter ended June 30, 2007 ----------------------------------------- --------------------------------------- (Amounts in thousands) Severance Severance and Early and Early Operating Cash Flow and As Retirement As As Retirement As Operating Cash Flow Margin Reported Costs Adjusted Reported Costs Adjusted -------------- ------------ ------------- ------------ ----------- ------------ Operating Income $ 161,969 $ (480) $ 162,449 $ 171,298 $ (1,594) $172,892 Add back: Depreciation and amortization 144,250 - 144,250 140,462 - 140,462 ------------- ------------ ------------- ------------ ----------- ------------ Operating cash flow $ 306,219 $ (480) $ 306,699 $ 311,760 $ (1,594) $313,354 ============= ============ ============= ============ =========== ============ Revenue $ 562,550 $ 562,550 $ 578,826 $578,826 ============= ============= ============ ============ Operating income margin (Operating income divided by revenue) 28.8% 28.9% 29.6% 29.9% ============= ============= ============ ============ Operating cash flow margin (Operating cash flow dividend by revenue) 54.4% 54.5% 53.9% 54.1% ============= ============= ============ ============ For the six months ended For the six months ended June 30, 2008 June 30, 2007 ------------------------------------------ ------------------------------------------------------- Severance Severance and Early Carrier and Early Operating Cash Flow and As Retirement As As Dispute Retirement As Operating Cash Flow Margin Reported Costs Adjusted Reported Settlement Costs Adjusted -------------- ------------ ------------- ------------ ----------- ------------ -------------- Operating Income $ 326,281 $ (3,371) $ 329,652 $ 364,600 $ 38,700 $ (1,776) $ 327,676 Add back: Depreciation and amortization 285,330 - 285,330 262,643 - - 262,643 ------------- ------------ ------------- ------------ ----------- ------------ ------------- Operating cash flow $ 611,611 $ (3,371) $ 614,982 $ 627,243 $ 38,700 $ (1,776) $ 590,319 ============= ============ ============= ============ =========== ============ ============= Revenue $ 1,131,755 $1,131,755 $1,134,973 $ 38,700 $1,096,273 ============= ============= ============ =========== ============= Operating income margin (Operating income divided by revenue) 28.8% 29.1% 32.1% 29.9% ============= ============= ============ ============= Operating cash flow margin (Operating cash flow divided by revenue) 54.0% 54.3% 55.3% 53.8% ============= ============= ============ =============
(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. 6 -----END PRIVACY-ENHANCED MESSAGE-----