Frontier Communications 2009 Annual Report Download - page 37

Download and view the complete annual report

Please find page 37 of the 2009 Frontier Communications annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 107

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107

expect to incur operating expenses and capital expenditures of approximately $100.0 million and $75.0 million,
respectively, in 2010 related to these integration activities.
Cash Flow used by 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 our 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 in full 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.
Capital Expenditures
In 2009, 2008 and 2007, our capital expenditures were $256.0 million (including $25.0 million of Verizon
integration-related capital expenditures), $288.3 million and $315.8 million, respectively. 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 $220.0 million to $240.0 million for 2010 related to our
currently owned properties, and an additional $75.0 million of capital expenditures related to the integration
activities of the pending Verizon Transaction.
Cash Flow used by and provided from Financing Activities
Issuance of Debt Securities
On October 1, 2009, we completed a registered debt offering of $600.0 million aggregate principal amount
of 8.125% senior unsecured notes due 2018. The issue price was 98.441% of the principal amount of the notes,
and we received net proceeds of approximately $578.7 million from the offering after deducting underwriting
discounts and offering expenses. We used the net proceeds from the offering, together with cash on hand
(including cash proceeds from our April 2009 debt offering described below), to finance a cash tender offer for
our outstanding 9.250% Senior Notes due 2011 (the 2011 Notes) and our outstanding 6.250% Senior Notes due
2013 (the 2013 Notes), as described below.
On April 9, 2009, we completed a registered offering of $600.0 million aggregate principal amount of
8.25% senior unsecured notes due 2014. The issue price was 91.805% of the principal amount of the notes. We
received net proceeds of approximately $538.8 million from the offering after deducting underwriting discounts
and offering expenses. We used the net proceeds from the offering to repurchase outstanding debt, as described
below.
On March 28, 2008, we borrowed $135.0 million under a senior unsecured term loan facility that was
established on March 10, 2008. The loan matures in 2013 and bears interest based on the prime rate or London
Interbank Offered Rate (LIBOR), at our election, plus a margin which varies depending on our debt leverage
ratio. We used the proceeds to repurchase, during the first quarter of 2008, $128.7 million principal amount of
the 2011 Notes and to pay for the $6.3 million of premium on early retirement of those notes.
On March 23, 2007, we issued in a private placement an aggregate $300.0 million principal amount of
6.625% Senior Notes due 2015 and $450.0 million principal amount of 7.125% Senior Notes due 2019.
Proceeds from the sale were used to pay down in full $200.0 million principal amount of indebtedness
borrowed on March 8, 2007 under a bridge loan facility in connection with the acquisition of Commonwealth,
and to redeem, on April 26, 2007, $495.2 million principal amount of our 7.625% Senior Notes due 2008. In
the second quarter of 2007, we completed an exchange offer (to publicly register the debt) for the $750.0
35
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES