Frontier Communications 2008 Annual Report Download - page 26

Further, the current credit market turmoil and our below investment grade credit ratings may make it more
difficult and expensive to refinance our maturing debt, although we do not have any significant maturities until
2011. We have approximately $3.9 million and $7.2 million of debt maturing in 2009 and 2010, respectively.
Cash Flow provided by and used in Operating Activities
Cash provided by operating activities declined $82.4 million, or 10%, for 2008 as compared to 2007. The
decline resulted from a drop in operating income, as adjusted for non-cash items, lower investment income, a
decrease in accounts payable and an increase in current income tax expenditures. These declines were partially
offset by a decrease in accounts receivable that positively impacted our cash position as compared to the prior
year.
We have in recent years paid relatively low amounts of cash taxes. We expect that in 2009 and beyond our
cash taxes will increase substantially, as our federal net operating loss carryforwards and AMT tax credit
carryforwards are expected to be fully utilized. We paid $78.9 million in cash taxes during 2008, and expect to
pay approximately $90.0 million to $110.0 million in 2009. Our 2009 cash tax estimate reflects the anticipated
favorable impact of bonus depreciation that is part of the economic stimulus package signed into law by
President Obama.
Cash Flow used by and provided from Investing Activities
Acquisitions
On March 8, 2007, we acquired Commonwealth in a cash-and-stock taxable transaction, for a total
consideration of approximately $1.1 billion. We paid $804.1 million in cash ($663.7 million net, after cash
acquired) and issued common stock with a value of approximately $249.8 million.
In connection with the acquisition of Commonwealth, we assumed $35.0 million of debt under a revolving
credit facility and $191.8 million face amount of Commonwealth convertible notes (fair value of $209.6
million). During March 2007, we paid down the $35.0 million credit facility. We retired all of the
Commonwealth notes as of December 31, 2008.
On October 31, 2007, we acquired GVN for a total cash consideration of $62.0 million.
Rural Telephone Bank
We received approximately $64.6 million in cash from the dissolution of the Rural Telephone Bank (RTB)
in April 2006, which resulted in the recognition of a pre-tax gain of approximately $61.4 million during the
second quarter of 2006, as reflected in investment income in the consolidated statements of operations for the
year ended December 31, 2006. Our tax net operating losses were used to absorb the cash liability for taxes.
Sale of ELI
During 2006, we sold ELI, our CLEC business (including its associated real estate), for $255.3 million in
cash plus the assumption of approximately $4.0 million in capital lease obligations.
Capital Expenditures
In 2008, our capital expenditures were $288.3 million. We continue to closely scrutinize all of our capital
projects, emphasize return on investment and focus our capital expenditures on areas and services that have the
greatest opportunities with respect to revenue growth and cost reduction. We anticipate capital expenditures of
approximately $250.0 million to $270.0 million for 2009.
25
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES