8-K

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 1, 2016

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.)
401 Merritt 7, Norwalk, Connecticut	06851
(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 8.01 Other Events

As previously announced, on April 1, 2016, Frontier Communications Corporation (“Frontier”) closed its acquisition of the wireline properties of Verizon Communications Inc. (“Verizon”) in California, Florida and Texas (the “Transaction”).

Frontier is filing this Current Report on Form 8-K to present the unaudited interim condensed combined statements of assets, liabilities and parent funding of Verizon’s Separate Telephone Operations in California, Florida and Texas (the “Group”) as of March 31, 2016 and the related unaudited interim condensed combined statements of income and comprehensive income and cash flows for each of the three month periods ended March 31, 2016 and 2015, which are filed as Exhibit 99.1 hereto.

Frontier is also filing with this Form 8-K the Group’s Management’s Discussion and Analysis of Financial Condition and Results of Operations as of and for each of the three month periods ended March 31, 2016 and 2015, filed as Exhibit 99.2 hereto, which should be read in conjunction with the financial statements referenced above.

As part of the Transaction, certain assets and liabilities that are included in the Group’s financial statements were not acquired by Frontier and were retained by Verizon, and certain other assets and liabilities that are not included in the Group’s financial statements were acquired by Frontier. This Form 8-K also presents the unaudited pro forma condensed combined financial statements of Frontier, after giving effect to the Transaction, as of and for the three months ended March 31, 2016, which are filed as Exhibit 99.3 hereto.

An adjustment to revenue and costs and expenses was made in the pro forma condensed combined statement of operations information for the three months ended March 31, 2016 relating to a customer contract that was retained by Verizon. No adjustments for this customer contract had been made in the pro forma financial statements for periods prior to the three months ended March 31, 2016. There was no impact to depreciation and amortization expense as a result of this adjustment. The impact for the year ended December 31, 2015 is reflected in the table below. The impact of the retained customer contract on previously issued pro forma financial statements for the year ended December 31, 2014 approximated the amounts in 2015.

	For the three months ended								For the year ended
	March 31, 2015		June 30, 2015		September, 30 2015		December 31, 2015		December 31, 2015
($ in millions)
Revenue	$	26	$	19	$	23	$	20	$	88
Costs and Expenses	$	26	$	19	$	23	$	18	$	86
Operating Income	$	—	$	—	$	—	$	2	$	2

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

99.1 Unaudited interim condensed combined statements of assets, liabilities and parent funding of Verizon’s Separate Telephone Operations in California, Florida and Texas as of March 31, 2016 and the related unaudited interim condensed combined statements of income and comprehensive income and cash flows for each of the three month periods ended March 31, 2016 and 2015.

99.2 Management’s Discussion and Analysis of Financial Condition and Results of Operations relating to the unaudited interim condensed combined statements of assets, liabilities and parent funding of Verizon’s Separate Telephone Operations in California, Florida and Texas as of March 31, 2016 and the related unaudited interim condensed combined statements of income and comprehensive income and cash flows for each of the three month periods ended March 31, 2016 and 2015.

99.3 Unaudited pro forma condensed combined financial statements of Frontier, after giving effect to the Transaction, as of and for the three months ended March 31, 2016.

99.4 Unaudited pro forma condensed combined statement of operations information of Frontier and related notes for the year ended December 31 , 2015 (filed within Exhibit 99.3 to Frontier’s Current Report on Form 8-K filed on April 18, 2016).*

* Incorporated by reference.

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 1, 2016	By: /s/ John M. Jureller
	John M. Jureller
	Executive Vice President
	and Chief Financial Officer

EX-99.1

Exhibit 99.1

Verizon’s Separate Telephone Operations

in California, Florida and Texas

Condensed Combined Financial Statements

For the three months ended

March 31, 2016 and 2015

VERIZON’S SEPARATE TELEPHONE OPERATIONS IN CALIFORNIA, FLORIDA AND TEXAS

INDEX TO CONDENSED COMBINED FINANCIAL STATEMENTS

	Page
Condensed Combined Statements of Income and Comprehensive Income Three months ended March 31, 2016 and 2015		2
Condensed Combined Statements of Assets, Liabilities and Parent Funding At March 31, 2016 and December 31, 2015		3
Condensed Combined Statements of Cash Flows Three months ended March 31, 2016 and 2015		4
Notes to Condensed Combined Financial Statements		5

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VERIZON’S SEPARATE TELEPHONE OPERATIONS IN CALIFORNIA, FLORIDA AND TEXAS

CONDENSED COMBINED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

	Three Months Ended March 31,
(dollars in millions) (unaudited)	2016			2015
Operating Revenues (including $98 and $99 from affiliates, respectively)	$	1,394		$	1,448
Operating Expenses (including $608 and $597 allocated from affiliates, respectively)
Cost of services (exclusive of items shown below)		730			721
Selling, general and administrative expense		324			325
Depreciation and amortization expense		239			250
Total Operating Expenses		1,293			1,296
Operating Income		101			152
Interest expense, net		(9	)		(8	)
Income Before Income Taxes		92			144
Income tax provision		(36	)		(56	)
Net Income and Comprehensive income	$	56		$	88

See Notes to Condensed Combined Financial Statements

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VERIZON’S SEPARATE TELEPHONE OPERATIONS IN CALIFORNIA, FLORIDA AND TEXAS

CONDENSED COMBINED STATEMENTS OF ASSETS, LIABILITIES AND PARENT FUNDING

(dollars in millions)(unaudited)	At March 31, 2016			At December 31, 2015
Assets
Current assets
Accounts receivable:
Trade and other, net of allowances for uncollectibles of $27 in both periods	$	339		$	415
Affiliates		27			174
Prepaid expense and other		66			73
Total current assets		432			662
Plant, property and equipment		24,027			24,034
Less accumulated depreciation		(16,076	)		(15,957	)
Plant, property and equipment, net		7,951			8,077
Prepaid pension asset		2,781			2,781
Intangible assets, net		6			7
Other assets		68			68
Total assets	$	11,238		$	11,595
Liabilities and Parent Funding
Current liabilities
Debt maturing within one year
Capital lease obligations	$	33		$	30
Accounts payable and accrued liabilities:
Trade and other		547			610
Affiliates		173			372
Advanced billings and customer deposits		192			196
Other current liabilities		10			13
Total current liabilities		955			1,221
Long-term debt		666			674
Employee benefit obligations		2,018			2,014
Deferred income taxes		2,552			2,541
Other long-term liabilities		156			162
Total liabilities		6,347			6,612
Parent funding		4,891			4,983
Total liabilities and parent funding	$	11,238		$	11,595

See Notes to Condensed Combined Financial Statements

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VERIZON SEPARATE TELEPHONE OPERATIONS IN CALIFORNIA, FLORIDA AND TEXAS

CONDENSED COMBINED STATEMENTS OF CASH FLOWS

	Three Months Ended March 31,
(dollars in millions)(unaudited)	2016			2015
Cash Flows From Operating Activities
Net Income	$	56		$	88
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		239			250
Deferred income taxes		11			54
Employee retirement benefits		25			17
Bad debt expense		13			19
Changes in current assets and liabilities:
Accounts receivable non-affiliates		63			49
Other current assets		6			(5	)
Accounts payable non-affiliates and accrued liabilities		(60	)		6
Accounts receivables/payable affiliates, net		(82	)		(193	)
Advanced billings and customer deposits and other current liabilities		(8	)		(80	)
Other, net		(24	)		(17	)
Net cash provided by operating activities		239			188
Cash Flows From Investing Activities
Capital expenditures (including capitalized software)		(176	)		(174	)
Other, net		—			1
Net cash used in investing activities		(176	)		(173	)
Cash Flows From Financing Activities
Repayments of capital lease obligations		(5	)		(2	)
Net change in parent funding, allocations and intercompany reimbursement		(58	)		(13	)
Net cash used in financing activities		(63	)		(15	)
Net change in cash		—			—
Cash, beginning of period		—			—
Cash, end of period	$	—		$	—

See Notes to Condensed Combined Financial Statements

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VERIZON’S SEPARATE TELEPHONE OPERATIONS IN CALIFORNIA, FLORIDA AND TEXAS

NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS

(UNAUDITED)

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared based upon Securities and Exchange Commission (“SEC”) rules that permit reduced disclosure for interim periods. For a more complete discussion of significant accounting policies and certain other information, you should refer to the financial statements included in the Frontier Communications Corporation (“Frontier”) Current Report on Form 8-K filed with the SEC on April 18, 2016.

Verizon’s Separate Telephone Operations in California, Florida and Texas (“the Group” or “we”) are comprised of the local exchange business and related landline activities of Verizon Communications Inc. (“Verizon” or “the Parent”) in the states of California, Florida and Texas, including Internet access, long distance services and broadband video provided to certain customers in those states.

The condensed combined financial statements include the financial position, results of operations and cash flows of the Group, which consists of all or a portion of the following entities:

• Verizon California Inc., Verizon Florida LLC and GTE Southwest Inc. (doing business as Verizon Southwest), referred to as Incumbent Local Exchange Carriers (“ILECs”),

• Verizon Long Distance LLC (“VLD”),

• Verizon Online LLC (“VOL”),

• Verizon Select Services, Inc. (“VSSI”), and

• Verizon Network Integration Corp. (“VNIC”).

The condensed combined financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). These financial statements have been derived from the consolidated financial statements and accounting records of Verizon, principally from statements and records represented in the entities described above, and represent carve-out stand-alone condensed combined financial statements. The Group includes regulated carriers and unregulated businesses in all three states, consisting principally of:

• Local wireline customers and related operations and assets used to deliver:

• Local exchange service,

• IntraLATA toll service,

• Network access service,

• Enhanced voice and data services, and

• Products at retail stores;

• Consumer and small business switched long distance customers (excluding any customers of Verizon Business Global LLC);

• Dial-up, high speed Internet (or Digital Subscriber Line) and fiber-to-the-premises Internet service provider customers; and,

• Broadband video in certain areas within California, Florida and Texas.

Many of the communications services that the Group provides are subject to regulation by the state regulatory commissions of California, Florida or Texas with respect to intrastate services and other matters, and by the Federal Communications Commission (“FCC”) with respect to interstate services and other matters. The FCC and state commissions also regulate some of the rates, terms and conditions that carriers pay each other for the exchange voice traffic (particularly traditional wireline traffic) over different networks and other aspects of interconnection for some services. All of the broadband video services the Group provides, including the payment of franchise fees, are subject to regulation by state or local governmental authorities. The Federal Cable Act generally requires companies to obtain a local cable franchise, and the FCC has adopted rules that interpret and implement this requirement. Also, the FCC has a body of rules that apply to cable operators.

Financial statements have not historically been prepared for the Group as it did not operate as a separate business and did not constitute a separate legal entity. The accompanying condensed combined financial statements have been prepared using state-specific information, where available, and allocations where data is not maintained on a state-specific basis within the Group’s books and records. The allocations impacted substantially all of the statements of income and comprehensive income items other than operating revenues and all balance sheet items with the exception of plant, property and equipment and accumulated depreciation which are maintained at the state level. All significant intercompany transactions within the Group have been eliminated. These financial statements reflect all adjustments that are necessary for a fair presentation of results of operations and financial condition for the interim periods shown including normal recurring accruals and other items. The results for the interim periods are not necessarily indicative of results for the full year.

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The businesses that comprise the condensed combined financial statements do not maintain cash balances independent of the Verizon consolidated group. Accordingly the Verizon consolidated group provides the cash management functions for the businesses in the condensed combined financial statements and the condensed combined statements of cash flows reflect the activities of the businesses in the condensed combined financial statements.

The methodology for preparing the financial statements included in the accompanying condensed combined financial statements is based on the following:

ILECs: All operations of the ILECs’ business in California, Florida and Texas are allocated entirely to the Group, and accordingly, are included in the condensed combined statements of assets, liabilities and parent funding and statements of income and comprehensive income except for affiliate notes payable, notes receivable, and related interest balances.

All other: For the condensed combined statements of assets, liabilities and parent funding, Verizon management evaluated the possible methodologies for allocation and determined that, in the absence of a more specific methodology, an allocation based on percentage of revenue best reflected the group’s share of the respective balances for most of the accounts, with the exception of the following: accounts receivable were calculated based on an applicable days sales outstanding ratio; accounts payable were calculated based on an applicable days payables outstanding ratio; plant, property and equipment were assigned based on the location of assets in state-specific records, except for construction in progress which was computed based on the respective percentage of the Group’s plant, property and equipment within California, Florida and Texas as compared to the total entity plant, property and equipment; and income tax-related accounts were computed based on specific tax calculations. Except for the ILEC’s discussed above, and as further discussed below, none of the employee benefit-related assets and liabilities nor general operating tax-related assets and liabilities were allocated. For the condensed combined statements of income and comprehensive income, operating revenues were determined using applicable billing system data and depreciation expense was determined based upon state-specific records. The remaining operating expenses were allocated based on the respective percentage of the Group’s revenue within California, Florida and Texas, to the total entity revenues. The tax provision was calculated as if the Group was a separate tax payer.

Management believes the assumptions and allocations are reasonable and reflect all costs of doing business in accordance with SAB Topic 1.B.1; however, they may not be indicative of the actual results of the Group had it been operating as an independent entity for the periods presented or the amounts that may be incurred by the Group in the future. Actual amounts that may have been incurred if the Group had been a stand-alone entity for the periods presented would depend on a number of factors, including the Group’s chosen organizational structure, what functions were outsourced or performed by the Group’s employees and strategic decisions made in areas such as information technology systems and infrastructure.

On February 5, 2015, Verizon entered into a definitive agreement with Frontier pursuant to which Verizon agreed to contribute the Group to a newly formed legal entity and that entity will then be acquired by Frontier for approximately $10.5 billion, subject to certain adjustments and the assumption of debt. The transaction closed on April 1, 2016.

Upon closing of the transaction, pursuant to the Employee Matters Agreement (“EMA”), any Verizon pension benefits under a tax qualified pension plan (other than the Verizon Wireless Retirement Plan and Western Union International, Inc. Pension Plan) relating to a Group employee as of closing were transferred to successor pension plans maintained by Frontier or an affiliate thereof. The EMA describes the assets transferred from the Verizon pension plans to the Frontier pension plans, and a special funding provision that may provide additional Verizon company assets for pension funding purposes. The EMA also provides, with limited exception, that active postretirement health, dental and life insurance benefits relating to Group employees as of closing ceased to be liabilities of the Verizon Welfare Plans or of Verizon and such liabilities were assumed by the applicable transferred company and the applicable Frontier welfare plans. Accordingly, these EMA related plan assets or obligations were not transferred to Frontier or its affiliates upon closing at the amounts reflected in these financial statements.

In accordance with the Securities Purchase Agreement by and between Frontier and Verizon, Verizon and its subsidiaries were required to complete a Pre-Closing Reorganization prior to the closing of the transaction on April 1, 2016. As part of the Pre-Closing Reorganization, the Group entered into various legal agreements whereby (1) certain assets and liabilities that were previously included in the Group had to be transferred from the Group in order to be retained by Verizon (“Excluded Assets and Liabilities”) and (2) certain assets and liabilities not included in the Group had to be transferred into the Group in order to be assumed by Frontier (“Assumed Assets and Liabilities”).

The Excluded Assets and Liabilities were transferred out of the Group to be retained by Verizon. In addition, the Assumed Assets and Liabilities were transferred into the Group from various other Verizon entities. During the first quarter of 2016, approximately $90 million in net assets, primarily property, plant and equipment, were distributed from the Group through parent funding. These contributions and distributions were effective as of or before March 31, 2016.

We have evaluated subsequent events through May 13, 2016, the date these condensed combined financial statements were available to be issued.

As a result of the adoption of the accounting standard update related to the simplification of the presentation of debt issuance costs, we have reclassified certain amounts related to debt issuance costs in the prior period to conform to the current period’s presentation. In conjunction with preparing the condensed combined financial statements, we reclassified certain insignificant amounts within operating cash flows on the combined statement of cash flows for the three months ended March 31, 2015 from Loss on fixed asset transactions to Accounts receivables/payable affiliates, net.

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Summary of Significant Accounting Policies

Use of Estimates – The accompanying condensed combined financial statements have been prepared using US GAAP, which requires management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates.

Examples of significant estimates include the allowance for doubtful accounts; the recoverability of plant, property and equipment; the recoverability of intangible assets and other long lived assets; accrued expenses; pension and postretirement benefit assumptions; and income taxes. In addition, estimates were made to determine the allocations in preparing the condensed combined financial statements as described in the Basis of Presentation.

Fair Value Measurements – Fair value of financial and non-financial assets and liabilities is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The three-tier hierarchy for inputs used in measuring fair value, which prioritizes the inputs used in the valuation methodologies in measuring fair value, is as follows:

Level 1—Quoted prices in active markets for identical assets or liabilities

Level 2—Observable inputs other than quoted prices in active markets for identical assets and liabilities

Level 3—No observable pricing inputs in the market

Financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. The assessment of the significance of a particular input to the fair value measurements requires judgment, and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.

Recently Adopted Accounting Standards

During the first quarter of 2016, we adopted the accounting standard update related to the simplification of the presentation of debt issuance costs. This standard update requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. We applied the amendment in this accounting standard update retrospectively to all periods presented which resulted in the reclassification of $3 million from Other assets to Long-term debt on the condensed combined statement of assets, liabilities and parent funding at December 31, 2015.

Recently Issued Accounting Standards

In February 2016, the accounting standard update related to leases was issued. This standard update intends to increase transparency and improve comparability by requiring entities to recognize assets and liabilities on the balance sheet for all leases, with certain exceptions. In addition, through improved disclosure requirements, the standard update will enable users of financial statements to further understand the amount, timing, and uncertainty of cash flows arising from leases. This standard update is effective as of the first quarter of 2019; however, early adoption is permitted. The Group is currently evaluating the impact that this standard update will have on the condensed combined financial statements.

In May 2014, the accounting standard update related to the recognition of revenue from contracts with customers was issued. This standard update clarifies the principles for recognizing revenue and develops a common revenue standard for US GAAP and International Financial Reporting Standards. The standard update intends to provide a more robust framework for addressing revenue issues; improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets; and provide more useful information to users of financial statements through improved disclosure requirements. Upon adoption of this standard update, we expect that the allocation and timing of revenue recognition will be impacted. In August 2015, an accounting standard update was issued that delays the effective date of this standard update until the first quarter of 2018. Companies are permitted to early adopt the standard update in the first quarter of 2017.

There are two adoption methods available for implementation of the standard update related to the recognition of revenue from contracts with customers. Under one method, the guidance is applied retrospectively to contracts for each reporting period presented, subject to allowable practical expedients. Under the other method, the guidance is applied to contracts not completed as of the date of initial application, recognizing the cumulative effect of the change as an adjustment to the beginning balance of retained earnings, and also requires additional disclosures comparing the results to the previous guidance. The Group is currently evaluating these adoption methods and the impact that this standard update will have on the condensed combined financial statements.

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2. PARENT FUNDING

Changes in Parent Funding were as follows:

	(dollars in millions)
Balance at January 1, 2016	$	4,983
Net income		56
Contributions from and distributions to affiliates		(90	)
Net change due to parent funding, allocations and intercompany reimbursements		(58	)
Balance at March 31, 2016	$	4,891

The Parent Company funding in the condensed combined statements of assets, liabilities and parent funding represents Verizon’s historical funding of the Group. For purposes of these condensed combined financial statements, funding requirements have been summarized as “Parent funding” without regard to whether the funding represents debt or equity. No separate equity accounts are maintained for the Group.

3. DEBT

Changes to debt during the three months ended March 31, 2016 are as follows:

(dollars in millions)	Debt Maturing within One Year			Long-term Debt			Total
Balance at January 1, 2016	$	30		$	674		$	704
Repayments of capital lease obligations		(5	)		—			(5	)
Reclassifications		8			(8	)		—
Balance at March 31, 2016	$	33		$	666		$	699

The fair value of debt is determined using various methods, including quoted prices for identical terms and maturities, which is a Level 1 measurement, as well as quoted prices for similar terms and maturities in inactive markets and future cash flows discounted at current rates, which are Level 2 measurements. The fair value of debt, excluding capital leases, was $551 million and $613 million at March 31, 2016 and December 31, 2015, respectively, as compared to the carrying value of $590 million at both March 31, 2016 and December 31, 2015.

The Group’s third party debt is guaranteed by Verizon. Each guarantee will remain in place for the life of the obligation unless terminated pursuant to its terms, including the ILECs no longer being wholly-owned subsidiaries of Verizon. The Group is in compliance with all debt covenants.

As a result of the closing of the Frontier transaction, as of April 1, 2016, GTE Southwest Inc., Verizon California Inc. and Verizon Florida LLC are no longer wholly-owned subsidiaries of Verizon, and the guarantees of $600 million aggregate principal amount of debentures and first mortgage bonds of those entities have been terminated pursuant to their terms.

Additional Financing Activities (Non-Cash Transaction)

The Group finances, primarily through vendor financing arrangements, long-lived assets, consisting primarily of network equipment. There were no purchases through vendor financing arrangements during the three months ended March 31, 2016. At March 31, 2016, $109 million of vendor financing arrangements entered into in the prior year remained outstanding.

4. EMPLOYEE BENEFITS

The Group participates in Verizon’s benefit plans. Verizon maintains non-contributory defined pension plans for many of its employees. The postretirement health care and life insurance plans for the retirees and their dependents are both contributory and non-contributory, and include a limit on the share of cost for recent and future retirees. Verizon also sponsors defined contribution savings plans to provide opportunities for eligible employees to save for retirement on a tax-deferred basis. A measurement date of December 31 is used for the pension and postretirement health care and life insurance plans, except upon a remeasurement event pursuant to the Group’s accounting.

The periodic income and expense related to Verizon’s benefit plans as well as the assets and obligations have been allocated by the Parent to ILECs on the basis of headcount and other factors deemed appropriate by management and with the assets and liabilities reflected as prepaid pension assets and employee benefit obligations in the condensed combined statements of assets, liabilities and parent funding. For all other entities, the assets and obligation have not been allocated. In all cases, benefit plan income and expense has been allocated to the entity based on headcount.

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The structure of Verizon’s benefit plans does not provide for the separate determination of certain disclosures for the Group. The required information is provided on a consolidated basis in Verizon’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2016.

Benefit Cost

The following table summarizes the allocated benefit costs related to the pension and postretirement health care and life insurance plans associated with the Groups’ operations.

(dollars in millions)	Pension				Health Care and Life
Three Months Ended March 31,	2016		2015		2016		2015
Net periodic benefit cost	$	11	$	2	$	14	$	15

Effective January 1, 2016, the Group changed the method it uses to estimate the interest component of net periodic benefit cost for pension and other postretirement benefits. Historically, the Group estimated the interest cost component utilizing a single weighted-average discount rate derived from the yield curve used to measure the benefit obligation at the beginning of the period. The Group has elected to utilize a full yield curve approach in the estimation of interest cost by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. The Group has made this change to provide a more precise measurement of interest cost by improving the correlation between projected benefit cash flows to the corresponding spot yield curve rates. The Group has accounted for this change as a change in accounting estimate and accordingly will account for it prospectively.

For the three months ended March 31, 2016, the impact of this change was a reduction of the interest cost component of net periodic benefit cost and an increase to Net income for insignificant amounts. The use of the full yield curve approach does not impact how the Group measures its total benefit obligations at December 31 or its annual net periodic benefit cost as any change in the interest cost component is completely offset by the actuarial gain or loss measured at year end which is immediately recognized in the Group’s consolidated statement of income. Accordingly, this change in estimate will not impact the Group’s operating income or net income as measured on an annual basis.

Severance Benefits

During the three months ended March 31, 2016, an immaterial amount was paid for severance benefits. During the three months ended March 31, 2015, we paid $13 million in severance benefits. At March 31, 2016, we had a remaining severance liability of $17 million.

5. TRANSACTIONS WITH AFFILIATES

Operating revenue includes transactions with Verizon for the rendering of local telephone services, network access, billing and collection services, interconnection agreements and the rental of facilities and equipment. These services were reimbursed by Verizon based on tariffed rates, market prices, negotiated contract terms or actual costs incurred by the Group.

The Group reimbursed Verizon for specific goods and services it provided to, or arranged for, based on tariffed rates or negotiated terms. These goods and services included items such as communications and data processing services, office space, professional fees and insurance coverage.

The Group was allocated Verizon’s share of costs incurred to provide services on a common basis to all of its subsidiaries. These costs included allocations for marketing, sales, accounting, finance, materials management, procurement, labor relations, legal, security, treasury, human resources, tax and audit services. Based on pools of costs and the entities they relate to, the allocations were determined based on a three-part factor which is computed based on the average of relative revenue, net plant, property and equipment and salaries and wages. The allocation factors are calculated by department and updated annually to reflect changes to business operations.

As it relates to the ILECs, the affiliate operating revenue and expense amounts represent all transactions with Verizon that are allocated entirely to the Group. As it relates to VLD, VOL, VSSI and VNIC, affiliate operating revenue and expense amounts with Verizon were allocated to the Group consistent with the methodology for determining operating revenues and operating expenses as described in Note 1, “Basis of Presentation.” Affiliate operating revenue and expense amounts within the Group have been eliminated.

6. COMMITMENTS AND CONTINGENCIES

In the ordinary course of business, the Group is involved in various commercial litigation and regulatory proceedings at the state and federal level. Where it is determined, in consultation with counsel based on litigation and settlement risks, that a loss is probable and estimable in a given matter, the Group establishes an accrual. An estimate of a reasonably possible loss or range of loss in excess of the amounts already accrued cannot be made at this time due to various factors typical in contested proceedings, including (1) uncertain damage theories and demands; (2) a less than complete factual record; (3) uncertainty concerning legal theories and their resolution by

9

courts or regulators; and (4) the unpredictable nature of the opposing party and its demands. The Group continuously monitors these proceedings as they develop and adjusts any accrual or disclosure as needed. The Group does not expect that the ultimate resolution of pending regulatory or legal matters in future periods will have a material effect on its financial condition, but it could have a material effect on its results of operations.

From time to time, state regulatory decisions require us to assure customers that we will provide a level of service performance that falls within prescribed parameters. There are penalties associated with failing to meet those service parameters and the Group, from time to time, pays such penalties. The Group does not expect these penalties to have a material effect on its financial condition, but they could have a material effect on its results of operations.

On April 29, 2015, the FCC released its right of first refusal offer of support to price cap carriers under the Connect America Fund (CAF) Phase II program, which is intended to provide long-term support for broadband in high-cost unserved or underserved areas. In August 2015, we accepted the CAF Phase II offer in Texas and California on behalf of Frontier. We conditioned our acceptance of CAF Phase II support in Texas and California on the issuance and acceptance of regulatory approvals for Frontier’s proposed acquisition of all the ownership interests of certain Verizon subsidiaries, including Verizon California Inc. and GTE Southwest Inc. by December 31, 2015. On April 1, 2016, Verizon and Frontier notified the FCC that the transaction had closed. Accordingly, on April 11, 2016, the FCC authorized Frontier to receive the CAF Phase II support. The CAF Phase II offer provides for approximately $49 million in annual support from 2015 through 2020 to deliver 10mbps/1mbps broadband service to approximately 115,000 households across California and Texas.

During 2015, Verizon and Frontier entered into a network transition agreement for the construction, installation and provisioning of inter-office facilities between the ILECs and Frontier. Under the terms of the agreement, Frontier made an upfront payment of approximately $15.2 million to Verizon for the estimated costs of the project. The inter-office facilities will be owned by the ILECs and included in the transferred business. As of March 31, 2016, Verizon incurred project related expenditures of approximately $12.3 million on behalf of the Group and the remaining balance of approximately $2.9 million is held as restricted cash by Verizon. The remaining balance will be repaid to Frontier in accordance with the network transition agreement.

10

EX-99.2

Exhibit 99.2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the financial statements of Verizon’s Separate Telephone Operations in California, Florida and Texas (“the Group”) and the notes thereto. This financial information, together with the pro forma adjustments detailed separately, reflects the operations that will constitute the Group’s business in connection with the sale.

Overview

Verizon Communications Inc.’s (“Verizon” or “the Parent”) wireline business provides customers with communications services that include voice, internet access, broadband video and data, next generation IP network services, network access, long distance and other services. Verizon’s Separate Telephone Operations in California, Florida and Texas (“the Group”) represent a portion of Verizon’s wireline business but have not been operated as a distinct business separate from Verizon’s wireline business and do not constitute a separate legal entity. Consequently, financial statements had not historically been prepared for the Group. The Group had approximately 9,300 employees as of March 31, 2016.

On February 5, 2015, Verizon entered into a definitive agreement with Frontier Communications Corporation pursuant to which Verizon agreed to contribute the Group to a newly formed legal entity and that entity will then be acquired by Frontier for approximately $10.5 billion, subject to certain adjustments and the assumption of debt. The transaction closed on April 1, 2016.

The Group is comprised of the local exchange business and related landline activities of Verizon in the states of California, Florida and Texas, including Internet access, long distance services and broadband video provided to certain customers in those states.

The Group is comprised of all or a portion of the following entities: Verizon California Inc., Verizon Florida LLC and GTE Southwest Inc. (doing business as Verizon Southwest), referred to as Incumbent Local Exchange Carriers (“ILECs”), Verizon Long Distance LLC (“VLD”), Verizon Online LLC (“VOL”), Verizon Select Services, Inc. (“VSSI”) and Verizon Network Integration Corp. (“VNIC”). The Group excludes all activities of Verizon Wireless.

The Group includes regulated carriers and unregulated businesses in all three states, consisting principally of:

• Local wireline customers and related operations and assets used to deliver:

• Local exchange service,

• IntraLATA toll service,

• Network access service,

• Enhanced voice and data services, and

• Products at retail stores;

• Consumer and small business switched long distance customers (excluding any customers of Verizon Business Global LLC);

• Dial-up, high speed Internet (or Digital Subscriber Line) and fiber-to-the-premises Internet service provider customers; and

• Broadband video in certain areas within California, Florida and Texas.

Many of the communications services that the Group provides are subject to regulation by the state regulatory commissions of California, Florida or Texas with respect to intrastate services and other matters, and by the Federal Communications Commission (“FCC”) with respect to interstate services and other matters. The FCC and state commissions also regulate some of the rates, terms and conditions that carriers pay each other for the exchange voice traffic (particularly traditional wireline traffic) over different networks and other aspects of interconnection for some services. All of the broadband video services the Group provides, including the payment of franchise fees, are subject to regulation by state or local governmental authorities. The Federal Cable Act generally requires companies to obtain a local cable franchise, and the FCC has adopted rules that interpret and implement this requirement. Also, the FCC has a body of rules that apply to cable operators.

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The sections that follow provide information about the important aspects of the Group and discuss their results of operations, financial position and sources and uses of cash and investments. Also highlighted are key trends and uncertainties related to the Group to the extent practicable.

Basis of presentation

Historically, financial statements have not been prepared for the Group as it did not operate as a distinct business and did not constitute a separate legal entity. The accompanying condensed combined financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) using state-specific information, where available, and allocations where data is not maintained on a state-specific basis within Verizon’s books and records. The allocations impacted substantially all of the statements of income and comprehensive income items other than operating revenues and all balance sheet items with the exception of plant, property and equipment and accumulated depreciation which are maintained at the state level. Verizon management believes the assumptions and allocations used to determine the amounts in the condensed combined financial statements are reasonable and reflect all costs of doing business. See Note 1 to the Group’s condensed combined financial statements for additional information regarding the allocation methodology. All significant intercompany transactions within the Group have been eliminated.

Transactions with affiliates

Operating revenue reported by the Group includes transactions with Verizon for the rendering of local telephone services, network access, billing and collection services, interconnection agreements and the rental of facilities and equipment. These services were reimbursed by Verizon based on tariffed rates, market prices, negotiated contract terms or actual costs incurred by the Group.

The Group reimbursed Verizon for specific goods and services it provided to, or arranged for, based on tariffed rates or negotiated terms. These goods and services included items such as communications and data processing services, office space, professional fees and insurance coverage.

The Group was allocated Verizon’s share of costs incurred to provide services on a common basis to all of its subsidiaries. These costs included allocations for marketing, sales, accounting, finance, materials management, procurement, labor relations, legal, security, treasury, human resources, and tax and audit services. Based on pools of costs and the entities they relate to, the allocations were determined based on a three part factor which is computed based on the average of relative revenue, net plant, property and equipment and salaries and wages. The allocation factors are calculated by department and updated annually to reflect changes to business operations.

As it relates to the ILECs, the affiliate operating revenue and expense amounts represent all transactions with Verizon that are allocated entirely to the Group. As it relates to VLD, VOL, VSSI, and VNIC, affiliate operating revenue and expense amounts with Verizon were allocated to the Group consistent with the methodology for determining operating revenues and operating expenses as described in Note 1 to the Group’s condensed combined financial statements.

Trends

There have been no significant changes to the information related to trends affecting the Group that was disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2015.

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Results of operations

Operating Revenues and Selected Operating Statistics

	Three Months Ended
(dollars in millions)	2016		March 31, 2015		Increase/(Decrease)
Operating revenues	$	1,394	$	1,448	$	(54	)	(3.7	)%
Connections (in thousands) (1)
Total Voice connections		3,256		3,578		(322	)	(9.0	)
Total Broadband connections		2,121		2,178		(57	)	(2.6	)
Fios Internet Subscribers		1,624		1,571		53		3.4
Fios Video subscribers		1,185		1,203		(18	)	(1.5	)
High-Speed Internet subscribers		497		607		(110	)	(18.1	)

⁽¹⁾  As of the end of the period

Operating revenues for the three months ended March 31, 2016 of $1,394 million declined $54 million, or 3.7%, compared to the similar period in 2015 primarily due to the continued decline of traditional voice (local exchange and long distance) and data revenues, partially offset by the expansion of Fios services, primarily from Fios Internet, and Ethernet services. The decline in voice revenues related to a 9.0% decline in total voice connections as a result of continued competition and technology substitution with wireless, competing VoIP and cable telephony services. Total voice connections include traditional switched access lines in service as well as Fios digital voice connections. The decline in data revenues relates to declines in both High-Speed Internet subscribers and core data circuits. We grew our Fios Internet subscriber base by 53 thousand, or 3.4%, from April 1, 2015 to March 31, 2016 while also improving penetration rates within our Fios service areas for Fios Internet. As of March 31, 2016, we achieved a penetration rate of 48.4% for Fios Internet, compared to a penetration rate of 47.7% at March 31, 2015.

Operating expenses

	Three Months Ended
(dollars in millions)	2016		March 31, 2015		Increase/(Decrease)
Costs of services (exclusive of items shown below)	$	730	$	721	$	9		1.2	%
Selling, general and administrative expense		324		325		(1	)	(0.3	)
Depreciation and amortization expense		239		250		(11	)	(4.4	)
Total Operating Expenses	$	1,293	$	1,296	$	(3	)	(0.2	)

Cost of services. Cost of services during the three months ended March 31, 2016 of $730 million increased $9 million, or 1.2%, compared to the similar period in 2015, primarily due to an increase in content costs as a result of programming license fee increases, partially offset by a decrease in employee costs as a result of reduced headcount.

Selling, general and administrative expense. Selling, general and administrative expense during the three months ended March 31, 2016 of $324 million remained consistent compared to the similar period in 2015.

Depreciation and amortization. Depreciation and amortization expense during the three months ended March 31, 2016 of $239 million decreased $11 million, or 4.4%, compared to the similar period in 2015. The decrease was primarily driven by a decrease in net depreciable assets.

Operating Income and EBITDA

Earnings before interest, taxes, depreciation and amortization expenses (“EBITDA”) and Adjusted EBITDA, which are presented below, are non-GAAP measures and do not purport to be alternatives to operating income as a measure of operating performance. Management believes that these measures are useful to investors and other users of our financial

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information in evaluating operating profitability on a more variable cost basis as they exclude the depreciation and amortization expense related primarily to capital expenditures, as well as in evaluating operating performance in relation to our competitors. EBITDA is calculated by adding back depreciation and amortization expense to operating income.

Adjusted EBITDA is calculated by excluding the effect of actuarial gains or losses from the calculation of EBITDA. Management believes that excluding actuarial gains or losses as a result of a remeasurement provides additional relevant and useful information to investors and other users of our financial data in evaluating the effectiveness of our operations and underlying business trends in a manner that is consistent with management’s evaluation of business performance.

Operating expenses include pension and benefit related credits and/or charges based on actuarial assumptions, including projected discount rates and an estimated return on plan assets. These estimates are updated in the fourth quarter or upon a remeasurement event to reflect actual return on plan assets and updated actuarial assumptions. The adjustment is recognized in the income statement during the fourth quarter or upon a remeasurement event pursuant to our accounting policy for the recognition of actuarial gains/losses. During the first quarter of 2016, we recorded a pension remeasurement charge in accordance with our accounting policy to recognize actuarial gains and losses in the period in which they occur.

It is management’s intent to provide non-GAAP financial information to enhance the understanding of the Group’s GAAP financial information, and it should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Each non-GAAP financial measure is presented along with the corresponding GAAP measure so as not to imply that more emphasis should be placed on the non-GAAP measure. The non-GAAP financial information presented may be determined or calculated differently by other companies.

	Three Months Ended
(dollars in millions)	2016			March 31, 2015			Increase/(Decrease)
Operating income	$	101		$	152		$	(51	)	(33.6	)%
Add Depreciation and amortization expense		239			250			(11	)	(4.4	)
EBITDA	$	340		$	402		$	(62	)	(15.4	)
Add Non-operating charges included in operating expenses:
Pension remeasurement charge		13			—			13		nm
Adjusted EBITDA	$	353		$	402			(49	)	(12.2	)
Operating income margin		7.2	%		10.5	%
EBITDA margin		24.4			27.8
Adjusted EBITDA margin		25.3			27.8

nm - not meaningful

The changes in the table above during the three months ended March 31, 2016, compared to the similar period in 2015, were a result of the factors described in connection with operating revenues and operating expenses.

Other results

	Three Months Ended
(dollars in millions)	2016			March 31, 2015			Increase/(Decrease)
Interest expense, net	$	9		$	8		$	1		12.5	%
Income tax provision		36			56			(20	)	(35.7	)
Effective income tax rate		39.1	%		38.9	%

Income taxes. The effective income tax rate is calculated by dividing the provision for income taxes by income before the provision for income taxes. The effective income tax rate for the Group during the three months ended March 31, 2016 was 39.1% on income before income taxes of $92 million compared to 38.9% during the similar period in 2015 on income before income taxes of $144 million. The effective income tax rate for the three months ended March 31, 2016 is comparable to the similar period in 2015.

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Liquidity and capital resources

	Three Months Ended
(dollars in millions)	2016			March 31, 2015			Change
Cash Flows Provided by (Used in)
Operating activities	$	239		$	188		$	51
Investing activities		(176	)		(173	)		(3	)
Financing activities		(63	)		(15	)		(48	)
Increase (Decrease) in Cash and Cash Equivalents	$	—		$	—		$	—
Capital expenditures		176			174			2

The Group uses net cash generated from operations to fund capital expenditures and repay affiliate debt.

Cash flows provided by operating activities. Net cash provided by operating activities was $239 million and $188 million during the three months ended March 31, 2016 and 2015, respectively. Historically, the Group’s principal source of funds has been cash generated from operations. During the three months ended March 31, 2016, cash from operating activities increased $51 million compared to the similar period in 2015 primarily as a result of lower working capital requirements, partially offset by a decrease in earnings.

Cash flows used in investing activities. Net cash used in investing activities was $176 million and $173 million during the three months ended March 31, 2016 and 2015, respectively. Capital expenditures are the Group’s primary use of capital resources as they facilitate the introduction of new products and services, enhance responsiveness challenges and increase the operating efficiency and productivity of the Group’s networks.

Cash flows used in financing activities. Net cash used in financing activities was $63 million and $15 million during the three months ended March 31, 2016 and 2015, respectively. The funding sources of the Group are included in parent funding in the condensed combined statements of assets, liabilities and parent funding without regard to whether the funding represents intercompany debt or equity. The Group participates in the centralized cash management services provided by Verizon. Verizon issues short-term debt, including commercial paper, to fund the working capital requirements of Verizon’s subsidiaries, including the Group, and invests funds in short-term investments on their behalf.

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EX-99.3

Exhibit 99.3

Unaudited pro forma condensed combined financial information

The unaudited pro forma condensed combined balance sheet information as of March 31, 2016 and the unaudited pro forma condensed combined statement of operations information for the three months ended March 31, 2016 are based upon (i) the historical consolidated financial information of Frontier and (ii) the historical combined financial information of the VSTO, and has been prepared to reflect the Verizon Transaction based on the acquisition method of accounting.

The unaudited pro forma condensed combined financial information presents the combination of the historical financial statements of Frontier and the historical financial statements of the VSTO, adjusted to give effect to (1) the transfer of specified assets and liabilities from Verizon to the VSTO that are not included in the VSTO historical balance sheet as of March 31, 2016, and the retention of specified assets and liabilities by Verizon that are included in the VSTO historical balance sheet as of March 31, 2016, as more fully described in note 3(a) below, (2) the adjustment of certain amounts to conform the VSTO financial information to Frontier accounting methodology, (3) the drawdown of $1,625 million under the 2015 Credit Agreement to fund the cash payment to Verizon for the purchase price, as more fully described in note 3(b) below, (4) the payment by Frontier to Verizon of $10.54 billion in cash and assumed debt (excluding any potential working capital and net debt purchase price adjustments as set forth in the Verizon Purchase Agreement) as more fully described in note 3(c) below and (5) the consummation of the transactions contemplated by the Verizon Purchase Agreement, with Frontier considered the accounting acquirer, based on the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial information. The historical financial information has been adjusted to give effect to events that are directly attributable to the Verizon Transaction and factually supportable and, in the case of the statement of operations information, that are expected to have a continuing impact.

The unaudited pro forma condensed combined balance sheet information has been prepared as of March 31, 2016, and gives effect to the Verizon Transaction and other events described above as if they had occurred on that date. The unaudited pro forma condensed combined statement of operations information, which has been prepared for the three months ended March 31, 2016, gives effect to the Verizon Transaction and other events described above as if they had occurred on January 1, 2015. The unaudited pro forma condensed combined statement of operations information of Frontier and related notes for the year ended December 31, 2015 are included within exhibit 99.3 to Frontier’s Form 8-K, as filed with the SEC on April 18, 2016, which is incorporated by reference into this report. See note 4(a) below for additional adjustments applicable to these financial statements.

The unaudited pro forma condensed combined financial information was prepared using, and should be read in conjunction with, (1) the unaudited combined financial statements of the VSTO as of and for the three months ended March 31, 2016 and (2) the unaudited consolidated financial statements of Frontier as of and for the three months ended March 31, 2016.

The unaudited pro forma condensed combined financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved had the Verizon Transaction and other events described above been completed at the dates indicated above. In addition, the unaudited pro forma condensed combined financial information does not purport to project the future results of operations of Frontier after completion of the Verizon Transaction and the other events described above. In the opinion of Frontier’s management, all adjustments considered necessary for a fair presentation have been included.

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The unaudited pro forma condensed combined financial information does not give effect to any potential cost savings or other operating efficiencies that could result from the Verizon Transaction. In addition, the fair value of the assets acquired and liabilities assumed in the Verizon Transaction are based upon estimates. The final purchase price allocation for the Verizon Transaction is dependent upon valuations and other studies that have not yet been completed. Accordingly, the purchase price allocation pro forma adjustments are preliminary and are subject to further adjustments as additional information becomes available and additional analyses are performed, and such further adjustments may be material, individually or in the aggregate. The purchase price allocation pro forma adjustments have been made solely for the purpose of providing unaudited pro forma condensed combined financial information.

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FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET INFORMATION

AS OF MARCH 31, 2016

($ in millions)

			VSTO
	Frontier		VSTO		Additional Transfer of Assets and Liabilities to/from Verizon (3a)			VSTO, as Adjusted		Additional Financing (3b)			Pro Forma Adjustments (3c)			Pro Forma Combined
ASSETS:
Cash and cash equivalents	$	500	$	—	$	—		$	—	$	1,406		$	(1,534	)(i)	$	372
Accounts receivable, net		544		366		(27	)		339		—			—			883
Restricted cash		8,352		—		—			—		—			(8,352	)(i)		—
Other current assets		180		66		(4	)		62		—			—			242
Total current assets		9,576		432		(31	)		401		1,406			(9,886	)		1,497
Property, plant and equipment, net		8,495		7,951		13			7,964		—			(271	)(ii)		16,188
Goodwill		7,166		—		—			—		—			1,980	(iii)		9,146
Other intangibles, net		1,067		6		(6	)		—		—			1,160	(iv)		2,227
Other assets		150		2,849		(2,781	)		68		(34	)		—			184
Total assets	$	26,454	$	11,238	$	(2,805	)	$	8,433	$	1,372		$	(7,017	)	$	29,242
LIABILITIES AND EQUITY:
Long-term debt due within one year	$	370	$	33	$	(26	)	$	7	$	81		$	—		$	458
Accounts payable and other current liabilities		1,364		922		(457	)		465		(216	)		21	(v)		1,634
Total current liabilities		1,734		955		(483	)		472		(135	)		21			2,092
Deferred income taxes		2,551		2,552		(376	)		2,176		—			(2,176	)(vi)		2,551
Other liabilities		1,419		2,174		(1,834	)		340		—			—			1,759
Long-term debt		15,496		666		(73	)		593		1,507			11	(vii)		17,607
Equity		5,254		4,891		(39	)		4,852		—			(4,873	)(viii)		5,233
Total liabilities and equity	$	26,454	$	11,238	$	(2,805	)	$	8,433	$	1,372		$	(7,017	)	$	29,242

See notes to unaudited pro forma condensed combined financial information

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FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS INFORMATION

FOR THE THREE MONTHS ENDED MARCH 31, 2016

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

	Frontier			VSTO		Pro Forma Adjustments			Pro Forma Combined
Revenue	$	1,355		$	1,394	$	(19	)(4a)	$	2,714
							(3	)(4b)
							(13	)(4c)
Cost and expenses (exclusive of depreciation and amortization)		843			1,054		(18	)(4a)		1,848
							1	(4b)
							(13	)(4c)
							(19	)(4d)
Depreciation and amortization		316			239		47	(4e)		561
							(39	)(4f)
							(2	)(4g)
Acquisition and integration costs		138			—		(138	)(4h)		—
Total operating expenses		1,297			1,293		(181	)		2,409
Operating income		58			101		146			305
Investment and other income, net		11			—		—			11
Interest expense		373			9		2	(4i)		384
Income tax expense (benefit)		(118	)		36		55	(4j)		(27	)
Net income (loss)		(186	)		56		89			(41	)
Less: Dividends on preferred stock		54			—		—			54
Net income (loss) attributable to Frontier common shareholders	$	(240	)	$	56	$	89		$	(95	)
Basic and diluted net loss per common share	$	(0.21	)						$	(0.08	)
Weighted-average shares outstanding (in millions)		1,164								1,164

See notes to unaudited pro forma condensed combined financial information

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Notes to unaudited pro forma condensed combined financial information

1. Description of the Verizon Transaction

On April 1, 2016, pursuant to the Verizon Purchase Agreement, Frontier acquired Verizon’s wireline operations that provide services to residential, commercial and wholesale customers in California, Florida and Texas for a purchase price of $10.54 billion in cash and assumed debt, excluding adjustments for working capital and net debt. As of March 31, 2016, these Verizon properties included 3.3 million voice connections, 2.1 million broadband connections, and 1.2 million Fios^® video subscribers. The network being acquired is the product of substantial capital investments made by Verizon, with approximately 55% of the residential households being enabled with Fios.

The unaudited pro forma condensed combined financial information was prepared for the purpose of developing the pro forma financial statements necessary to comply with the applicable disclosure and reporting requirements of the SEC. For purposes of the unaudited pro forma condensed combined financial information, the aggregate transaction costs (other than debt incurrence fees in connection with the 2015 Credit Agreement, as set forth in note 3(b)), which are charged as an expense of Frontier as they are incurred, were approximately $21 million subsequent to March 31, 2016 and include costs associated primarily with investment banker advisory fees, legal fees, and regulatory and auditor services of Frontier. This balance is reflected as an accrual in the Pro Forma Adjustments column on the unaudited pro forma condensed combined balance sheet as of March 31, 2016. The combined company also incurred and will incur integration costs primarily related to information systems, network and process conversions (including hardware and software costs). Integration costs were incurred in part in advance of the consummation of the Verizon Transaction, and are recorded based on the nature and timing of the specific action. For purposes of the unaudited pro forma condensed combined financial information, it was assumed that no amounts would be paid, payable or forgone by Verizon pursuant to orders or settlements issued or entered into in order to obtain governmental approvals from the Federal Communications Commission and in the States of California, Florida and Texas that were required to complete the Verizon Transaction.

Frontier is considered the accounting acquirer for purposes of the preparation of the unaudited pro forma condensed combined financial information. This conclusion is based upon Frontier’s consideration of all relevant factors included in the accounting standard regarding business combinations, including the purchase of a newly formed legal entity to which Verizon contributed the three operating entities — Verizon California Inc., Verizon Florida LLC and GTE Southwest Inc. — pursuant to the Verizon Purchase Agreement.

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2. Basis of purchase price allocation

The estimated purchase price ($10.54 billion less $611 million in assumed debt and other net adjustments of $43 million) has been allocated, on a preliminary basis, to the tangible and intangible assets acquired and liabilities assumed, as follows (dollars in millions):

Estimated transaction consideration:				$	9,886
Current assets	$	401
Property, plant & equipment		7,693
Goodwill		1,980
Other intangibles—Customer list		1,160
Other assets		68
Long-term debt due within one year		(7	)
Other current liabilities		(465	)
Long-term debt		(604	)
Other liabilities		(340	)
Total net assets acquired	$	9,886

The allocation of the purchase price to assets and liabilities is preliminary. The final allocation of the purchase price will be based on the fair values of the assets acquired and liabilities assumed as of the date of the Verizon Transaction, as determined by third-party valuation for certain assets and liabilities. These valuations are not yet completed. There can be no assurance that the actual allocation will not differ significantly from the preliminary allocation.

Frontier and Verizon have agreed to make a joint election under Section 338(h)(10) of the Internal Revenue Code, and comparable state and local tax code provisions.

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3. Pro forma balance sheet adjustments:

(a) the VSTO is adjusted to (1) exclude assets and liabilities that were retained by Verizon that are included in the VSTO’s financial statements and (2) give effect to certain assets and liabilities relating to the businesses that were contributed by Verizon to the three operating entities in connection with the Verizon Transaction. A brief description of these items follows (dollars in millions):

Balance	Amount			Reason
Accounts receivable, net	$	(27	)	Reclassification of affiliate balances to net presentation
Other current assets	$	(4	)	Other current assets related to businesses retained by Verizon
				Property, plant and equipment transferred by Verizon corporate entities
Property, plant and equipment, net	$	13		net of assets related to businesses retained by Verizon
Other intangibles, net	$	(6	)	Reclassification of non-network software to property, plant and equipment
Other assets	$	(1,689	)	Prepaid pension asset in excess of actuarial liability retained by Verizon
		(1,092	)	Reclassification of prepaid pension asset to offset the employee benefit obligation
	$	(2,781	)
Long-term debt due within one year	$	(26	)	Current debt related to businesses retained by Verizon
Accounts payable and other current liabilities	$	(433	)	Payables related to businesses retained by Verizon
		(27	)	Reclassification of affiliate balances to net presentation
				Accrued liabilities transferred by Verizon corporate entities
		3		net of liabilities to be retained by Verizon
	$	(457	)
Deferred income taxes	$	(376	)	Reflects the impact of the pro forma adjustments on deferred income taxes
Other liabilities	$	(1,092	)	Reclassification of prepaid pension asset to offset the employee benefit obligation
		(708	)	Pension and postemployment benefits retained by Verizon
		(23	)	Removal of accrued uncertain tax position liabilities and credits retained by Verizon
		(11	)	Removal of accrued severance liabilities retained by Verizon
	$	(1,834	)
Long-term debt	$	(73	)	Long-term debt related to businesses retained by Verizon
Equity	$	(39	)	Reflects the aggregate impact of the above noted entries

The pension and other postretirement employee benefits adjustments are based on amounts recorded by Verizon whereby the pension and OPEB obligations related to active employees only were transferred to Frontier and pension obligations were fully funded as of the closing date of the Verizon Transaction. An actuarial evaluation will be completed and may be different from that reflected in the unaudited pro forma condensed combined financial information. This difference may be material.

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(b) The pro forma adjustment to cash reflects the drawdown of $1,625 million under the 2015 Credit Agreement. Frontier used proceeds from the September 2015 private notes offering, together with the net proceeds from the June 2015 equity offerings, loan proceeds under the 2015 Credit Agreement and cash on hand to finance the Verizon Transaction and to pay related fees and expenses.

The adjustment presented reflects the debt incurrence of $1,625 million (including $81 million of current maturities), less assumed debt incurrence fees. Additionally, an adjustment of $216 million was made to reflect the payment of bridge financing fees of $183 million and debt incurrence fees of $33 million.

(c) (i) This adjustment reflects the purchase price of $10,540 million less assumed debt of $611 million and other net adjustments of $43 million resulting in $9,886 million of cash and restricted cash that were paid at closing of the Verizon Transaction (excluding any final working capital and net debt purchase price adjustments as set forth in the Verizon Purchase Agreement).

(ii) This adjustment reflects the fair value of property, plant and equipment.

(iii) This adjustment reflects the goodwill associated with the excess of the Verizon Transaction consideration issued over the preliminary estimated fair value of the underlying identifiable net tangible and intangible assets at March 31, 2016.

(iv) This adjustment reflects the preliminary fair value of the identifiable intangible asset (customer list) which was estimated by Frontier’s management primarily based on the fair values assigned to similar assets in recently completed acquisitions (a market approach). A third party valuation firm will be utilized to help determine the final fair value after the Verizon Transaction is completed, but this determination has not yet begun. There can be no assurance that the actual fair value determination will not differ significantly from the preliminary fair value determination. For purposes of the preliminary fair value determination, the estimated useful life of the customer list asset was assumed to be ten years.

(v) This adjustment records the unpaid non-recurring costs for acquisition related transaction costs, primarily bankers, lawyers and consulting advisory fees.

(vi) This adjustment eliminates the deferred tax liabilities of the VSTO as of March 31, 2016.

(vii) This adjustment reflects the fair value of assumed debt.

(viii) This adjustment eliminates the “as adjusted” net equity of the VSTO ($4,852 million) and recognizes unpaid transaction costs of $21 million as of March 31, 2016.

4. Pro forma statement of operations adjustments—VSTO:

(a) This adjustment excludes revenue and expenses relating to a customer contract that was retained by Verizon. No adjustment for this customer contract had been made in previously issued pro forma financial statements. There was no impact to depreciation and amortization expense as a result of this adjustment. The impact of the retained customer contract on previously issued pro forma financial statements for the year ended December 31, 2014 approximated the amounts in 2015. The impact for the year ended December 31, 2015 was as follows:

	For the three months ended								For the year ended
	March 31, 2015		June 30, 2015		September 30, 2015		December 31, 2015		December 31, 2015
($ in millions)
Revenue	$	26	$	19	$	23	$	20	$	88
Costs and Expenses	$	26	$	19	$	23	$	18	$	86
Operating Income	$	—	$	—	$	—	$	2	$	2

(b) This adjustment reflects results of operations related to certain operations, assets and facilities that were not transferred to Frontier in the Verizon Transaction.

(c) This adjustment reflects the reclassification of bad debt expense from cost and expenses to revenue in order to conform to Frontier’s accounting policy.

(d) This adjustment reflects pension, other postretirement employee benefits of retirees and postemployment benefits retained by Verizon based on the terms of the Verizon Purchase Agreement whereby the pension and OPEB obligations related to active employees only were transferred to Frontier and pension obligations were fully funded as of the closing date of the Verizon Transaction. The adjustment includes $6 million for pension and OPEB costs related to active employees and retirees to be retained by Verizon for the three months ended March 31, 2016. This adjustment also reflects the reversal of $13 million in non-cash actuarial gains that were recorded by Verizon in order to conform to Frontier’s accounting policy for pension and other postretirement benefits for the three months ended March 31, 2016.

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(e) This adjustment reflects amortization expense associated with the customer list asset estimated in note 3(c) above assuming an accelerated method of amortization and an estimated useful life of ten years, which corresponds to an increase in depreciation and amortization of $47 million for the three months ended March 31, 2016. Amortization expense, based on our current estimate of useful lives, is estimated to be approximately $190 million, $169 million, $148 million, $127 million and $105 million for the years ended December 31, 2016, 2017, 2018, 2019 and 2020, respectively.

(f) This adjustment reflects depreciation expense for property, plant and equipment, at fair value.

The actual depreciation and amortization expense, as described in note 4(e) and above, will be based on the final fair value attributed to the identifiable tangible and intangible assets based upon the results of the third-party valuation of the acquired assets. The depreciation and amortization rates may also change based on the results of this third-party valuation. There can be no assurance that the actual depreciation and amortization expense will not differ significantly from the pro forma adjustment presented, or estimated future expense amounts noted above.

(g) This adjustment primarily reflects depreciation expense for facilities that were not transferred to Frontier in the Verizon Transaction.

(h) This adjustment reflects the removal of acquisition and integration expenses related to costs incurred by Frontier in connection with the Verizon Transaction.

(i) This adjustment reflects additional interest expense on the $1,625 million drawdown under the 2015 Credit Agreement based on the weighted average interest rate determined based on current rates of 2.94% for the three months ended March 31, 2016 and the elimination of interest expense related to a bridge loan facility. An increase or decrease to the assumed weighted average interest rate of 25 basis points on the $1,625 million drawdown under the 2015 Credit Agreement would result in a change of approximately $1 million for the three months ended March 31, 2016.

(j) This adjustment reflects the income tax effect of the pro forma adjustments described in notes 4(a) through 4(i) above, using an estimated effective income tax rate of 38%.

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