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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark one)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2012
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 001-11001
FRONTIER COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
06-0619596
(I.R.S. Employer Identification No.)
3 High Ridge Park
Stamford, Connecticut
(Address of principal executive offices)
06905
(Zip Code)
(203) 614-5600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange
on which registered
Common Stock, par value $.25 per share
Series A Participating Preferred Stock Purchase Rights
The NASDAQ Stock Market LLC
The NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
Yes No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files). Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a
smaller reporting company. See definition of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer Accelerated Filer Non-Accelerated Filer Smaller Reporting Company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No
The aggregate market value of common stock held by non-affiliates of the registrant on June 29, 2012 was $3,799,677,000
based on the closing price of $3.83 per share on such date.
The number of shares outstanding of the registrant’s Common Stock as of February 15, 2013 was 998,275,000.
DOCUMENT INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Company’s 2013 Annual Meeting of Stockholders are incorporated by reference into
Part III of this Form 10-K.

Table of contents

  • Page 1
    ... Employer Identification No.) 06-0619596 06905 (Address of principal executive offices) 3 High Ridge Park Stamford, Connecticut (Zip Code) (203) 614-5600 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name...

  • Page 2
    ..., Executive Officers and Corporate Governance...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...Certain Relationships and Related Transactions, and Director Independence...Principal Accountant Fees and Services...PART IV...

  • Page 3
    FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES PART I Item 1. Business Frontier Communications Corporation (Frontier) is the largest communications company providing services predominantly to rural areas and small and medium-sized towns and cities in the U.S. Frontier and its subsidiaries are ...

  • Page 4
    ...Arizona, Idaho, Illinois, Indiana, Michigan, Nevada, North Carolina, Ohio, Oregon, South Carolina, Washington, West Virginia and Wisconsin and in portions of California bordering Arizona, Nevada and Oregon (collectively, the Acquired Territories), including Internet access and long distance services...

  • Page 5
    ... VoIP service • local and long distance voice services - local voice services - enhanced services (e.g., voicemail, call waiting) - long distance network services • access services • video services - direct broadcast satellite utilizing DISH - terrestrial utilizing fiber to the home • sales...

  • Page 6
    ...two hour appointment windows for the installation, hard-drive back-up services, 24-7 help desk PC support and inside wire maintenance (when bundled). We offer wireless broadband services (using unlicensed WiFi spectrum) in select markets utilizing networks that we own or operate. Long-term contracts...

  • Page 7
    ...and recognize as revenue activation fees, other residual fees and nominal management, billing and collection fees. Additionally, we offer fiber optic video services on a limited basis in the states of Indiana, Oregon and Washington pursuant to franchises, permits and similar authorizations issued by...

  • Page 8
    ... could make it more difficult to sell our bundled service offerings, and cause us to increase our promotions and/or lower our prices for our products and services, which would adversely affect our revenue, profitability and cash flows. During 2012, we added 23,400 new broadband subscribers...

  • Page 9
    ... 2.6% 1.9% 1.5% 5.0% 100% Includes Tennessee, Nevada, Iowa, Nebraska, Alabama, Utah, Georgia, New Mexico, Montana, Mississippi and Florida. The number of our access lines is one metric that has been used to understand our revenue and profitability. Access lines, however, have become less relevant...

  • Page 10
    ... Very High Bit-Rate DSL (VDSL) broadband equipment, and Voice over Internet Protocol (VoIP) switches. These systems will support advanced services such as Ethernet, Dedicated Internet, Multiprotocol Label Switching (MPLS) transport, and VoIP. The network is designed with redundancy and auto-failover...

  • Page 11
    FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES packages of value-added services to our voice customers. Our bundled services include broadband, unlimited long distance calling, enhanced telephone features and video offerings. We are also focused on increasing sales of existing products, ...

  • Page 12
    ... makes the required capital expenditures in the respective states. In addition, in certain states, we are subject to operating restrictions such as rate caps (including maintenance of existing rates on business and residential products and wholesale prices and terms of interconnection agreements...

  • Page 13
    ... 2012, to a near zero rate for terminating traffic by 2017. Frontier will be able to recover a significant portion of those revenues through end user rates and other replacement support mechanisms. Additionally, the Order requires VoIP providers to pay interstate terminating interconnection charges...

  • Page 14
    ... adopted orders which put wireline broadband Internet access service, commonly delivered by DSL or fiber technology, as well as mobile wireless based broadband Internet access service and other forms of broadband Internet access services on an equal regulatory footing with cable modem service. This...

  • Page 15
    ... which program packages are marketed to subscribers; and program access requirements. We provide video programming, on a limited basis, in Oregon, Washington and Indiana pursuant to franchises, permits and similar authorizations issued by local franchising authorities utilizing fiber optic delivery...

  • Page 16
    ...and the consolidated financial statements and related notes included in this report. Risks Related to Our Business We will likely face further reductions in voice customers, switched access minutes of use, long distance revenues and federal and state subsidy revenues, which could adversely affect us...

  • Page 17
    ...and other employee benefit obligations and pay dividends pursuant to our dividend policy. We have identified some potential areas of opportunity and implemented several growth initiatives, including increasing marketing promotions and related expenditures and launching new products and services with...

  • Page 18
    ... predict the outcome of negotiations of the collective bargaining agreements covering our employees. If we are unable to reach new agreements or renew existing agreements, employees subject to collective bargaining agreements may engage in strikes, work slowdowns or other labor actions, which could...

  • Page 19
    ..., in certain states, we are subject to operating restrictions such as rate caps (including maintenance of existing rates on business and residential products and wholesale prices and terms of interconnection agreements with competitive local exchange carriers and arrangements with carriers that, in...

  • Page 20
    ... an action is appropriate. A lowering of a rating may further increase our future borrowing costs and reduce our access to capital. We cannot assure that we will be able to continue paying dividends. Effective February 16, 2012, our Board of Directors set the annual cash dividend at $0.40 per share...

  • Page 21
    ... 2012, to a near zero rate for terminating traffic by 2017. Frontier will be able to recover a significant portion of those revenues through end user rates and other replacement support mechanisms. Additionally, the Order requires VoIP providers to pay interstate terminating interconnection charges...

  • Page 22
    ..., or 3%, of Frontier's total revenues in 2011. State subsidies represented $38.2 million, or 1%, of Frontier's total revenues in 2012 and $41.6 million, or 1%, in 2011. Surcharges to customers (local, long distance and interconnection) to recover universal service fund contribution fees which are...

  • Page 23
    ... our call centers and damage our or our customers' equipment and data. Despite security measures and business continuity plans, the Company's information technology networks and infrastructure may be vulnerable to damage, disruptions or shutdowns due to attack by hackers or breaches, employee error...

  • Page 24
    ... South Central Expressway, Allen, Texas 75013, at 14450 Burnhaven Drive, Burnsville, Minnesota 55306, at 1398 South Woodland Blvd., DeLand, Florida 32720, at 1800 41st Street, Everett, Washington 98203, at 1500 MacCorkle Avenue, Charleston, West Virginia 25303, at 8001 W. Jefferson Blvd., Fort Wayne...

  • Page 25
    ... or executive officers. The term of office of each of the foregoing officers of Frontier will continue until the next annual meeting of the Board of Directors and until a successor has been elected and qualified. KATHLEEN Q. ABERNATHY joined Frontier's management team in March 2010, after serving...

  • Page 26
    ...of the North American Telecom Industry. MELINDA WHITE has been with Frontier since January 2005. She is currently Executive Vice President, Revenue Development. Previously, she was Executive Vice President and General Manager, Marketing and New Business Operations from November 2009 to December 2010...

  • Page 27
    ...00 per share of common stock, paid quarterly. From the third quarter of 2010 through the fourth quarter of 2011, we paid an annualized cash dividend of $0.75 per share of common stock, paid quarterly. Effective February 16, 2012, our Board of Directors set the annual cash dividend at $0.40 per share...

  • Page 28
    ...of our common stock, the S&P 500 Stock Index and the S&P Telecommunication Services Index and that all dividends were reinvested. Base Period 12/07 INDEXED RETURNS Years Ending 12/09 12/10 12/11 Company/Index 12/08 12/12 Frontier Communications Corporation...S&P 500 Index...S&P Telecommunication...

  • Page 29
    FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES ISSUER PURCHASES OF EQUITY SECURITIES Period Total Number of Shares Purchased Average Price Paid per Share October 1, 2012 to October 31, 2012 Employee Transactions(1) ...November 1, 2012 to November 30, 2012 Employee Transactions(1) ...December ...

  • Page 30
    ...Frontier not included in this Form 10-K. 2012 ($ in thousands, except per share amounts) 2011 Year Ended December 31,(1) 2010 2009 2008 Revenue... Acquired Business from the date of its acquisition from Verizon on July 1, 2010. Operating results include the pre-tax impacts of losses on retirement of ...

  • Page 31
    ... introduce new product offerings, including our ability to offer bundled service packages on terms that are both profitable to us and attractive to customers; • The effects of changes in accounting policies or practices adopted voluntarily or as required by generally accepted accounting principles...

  • Page 32
    ... capital requirements, fund capital expenditures, make required debt payments, pay taxes, pay dividends to our stockholders and support our short-term and long-term operating strategies through 2013. However, a number of factors, including but not limited to, losses of voice customers, pricing...

  • Page 33
    ... continue to decrease over time as Frontier makes the required capital expenditures in the respective states. In the third quarter of 2011, the Company contributed four administrative properties appraised at $58.1 million to its qualified defined benefit pension plan. The Company is leasing back the...

  • Page 34
    FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES Cash Flows used by Investing Activities Capital Expenditures In 2012, 2011 and 2010, our capital expenditures were $802.5 million (including $54.1 million of integration-related capital expenditures), $824.8 million (including $76.5 million of ...

  • Page 35
    FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES sale of its May 2012 offering of $500.0 million of 9.250% Senior Notes due 2021, plus cash on hand, to purchase the Notes. The repurchases in the Debt Tender Offer for the Notes resulted in a loss on the early extinguishment of debt of $69.0 ...

  • Page 36
    ... subject to fees that vary depending on the Company's credit rating. The credit facility is available for general corporate purposes but may not be used to fund dividend payments. Letter of Credit Facility We also have a $40.0 million unsecured letter of credit facility, as amended. The terms of the...

  • Page 37
    FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES restrictions on the incurrence of liens on our assets, and restrictions on asset sales and transfers, mergers and other changes in corporate control. We are not subject to restrictions on the payment of dividends either by contract, rule or ...

  • Page 38
    ... or when products are delivered to customers. Revenue that is billed in advance includes: monthly recurring network access services, special access services and monthly recurring local voice, features, long distance and inside wire charges. The unearned portion of these fees is initially deferred as...

  • Page 39
    ...with the third quarter of 2011, the Company reorganized into six operating segments in order to leverage the full benefits of its local engagement model. The six operating segments consist of the following regions: Central, Midwest, National, Northeast, Southeast and West. Our operating segments are...

  • Page 40
    ... 2010. The asset transfers from Verizon to the Plan have been completed. We sponsor a noncontributory defined benefit pension plan covering a significant number of our current and former Frontier legacy employees and other postretirement benefit plans that provide medical, dental, life insurance and...

  • Page 41
    .... We review our asset allocation at least annually and make changes when considered appropriate. Our asset return assumption is made at the beginning of our fiscal year. In 2010, 2011 and 2012, our expected long-term rate of return on plan assets was 8.0%, 8.0% and 7.75%, respectively. Our actual...

  • Page 42
    FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES partially offset by the impact of a $10.8 million charge resulting from the enactment on May 25, 2011 of the Michigan Corporate Income Tax that eliminated certain future tax deductions. The higher rate in 2010 was primarily related to the write-...

  • Page 43
    ... of the Frontier legacy operations, which excludes the Acquired Business. REVENUE Revenue is generated primarily through the provision of local, network access, long distance, data, video and Internet services. Such revenues are generated through either a monthly recurring fee or a fee based on...

  • Page 44
    ... to increase broadband subscribers in 2013. As stated above, while the number of access lines is one metric to gauge certain revenue trends, it is not necessarily the best or only measure to evaluate our business. Management believes that customer counts and understanding different components...

  • Page 45
    FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES OTHER FINANCIAL AND OPERATING DATA As of % Increase As of % Increase As of December 31, 2012 (Decrease) December 31, 2011 (Decrease) December 31, 2010 Customers ...Broadband subscribers ...Video subscribers DISH and FiOS...DirecTV(1) ...Total ...

  • Page 46
    FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES REVENUE 2012 ($ in thousands) Amount $ Increase (Decrease) % Increase (Decrease) Amount 2011 $ Increase (Decrease) % Increase (Decrease) 2010 Amount Local and long distance services...Data and internet services ...Other ...Customer revenue......

  • Page 47
    ... to access line losses and the displacement of minutes of use by wireless, email and other communications services. Subsidy revenue, excluding the additional six months of revenue related to the Acquired Business, for 2011 of $204.8 million, decreased $7.4 million, or 3%, as compared with 2010, 46

  • Page 48
    ...by 2017. Frontier will be able to recover a significant portion of those revenues through end user rates and other replacement support mechanisms. Effective December 29, 2011, the Order required providers to pay interstate access rates for the termination of VoIP toll traffic. On April 25, 2012, the...

  • Page 49
    ... the Frontier legacy backbone, decreased long distance carriage costs in 2012, including a reduction in costs for our originating traffic associated with the third quarter implementation of the Order and reduced content costs related to fewer customers for FiOS video service. Network access expenses...

  • Page 50
    FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES $68.5 million, less amounts capitalized into the cost of capital expenditures of $15.8 million, $10.2 million and $8.3 million for 2012, 2011 and 2010, respectively. Based on current assumptions and plan asset values, we estimate that our 2013 ...

  • Page 51
    FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES We annually commission an independent study to update the estimated remaining useful lives of our plant assets. The latest study was completed in the fourth quarter of 2012, and after review and analysis of the results, we adopted new lives for ...

  • Page 52
    ...cash taxes during 2011. Our 2012 cash taxes paid reflects the continued impact of bonus depreciation in accordance with the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. In 2011, we received refunds of $53.9 million generated in part by the 2009 retroactive change...

  • Page 53
    FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES accounting method for repairs and maintenance costs related to tax years 2008 and prior. Absent any legislative changes in 2013, we expect that our cash tax payments will be approximately $125 million to $150 million for 2013. Net income ...

  • Page 54
    ...made in October 2012. We expect that we will make contributions to our pension plan of approximately $60 million in 2013. Item 8. Financial Statements and Supplementary Data The following documents are filed as part of this Report: 1. Financial Statements-See Index on page F-1. 2. Supplementary Data...

  • Page 55
    ... pursuant to Regulation 14A within 120 days after December 31, 2012. Item 14. Principal Accountant Fees and Services The information required by this Item is incorporated by reference from our definitive proxy statement for the 2013 Annual Meeting of Stockholders to be filed with the SEC pursuant to...

  • Page 56
    FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES (2) Index to Exhibits: All documents referenced below were filed pursuant to the Securities Exchange Act of 1934 by the Company, file number 001-11001, unless otherwise indicated. Exhibit No. Description 3.1 - Restated Certificate of ...

  • Page 57
    ...fiscal quarter ended June 30, 2010).* 4.23 - Form of Debenture under the Frontier North Indenture (filed as Exhibit 4.24 to the Company's Annual Report on Form 10-K for the year ended December 31, 2011 (the "2011 10-K")).* 10.1 - Credit Agreement, dated as of March 23, 2010, between the Company, the...

  • Page 58
    ... Plan (filed as Appendix A to the Company's Proxy Statement dated April 6, 2009).* 10.14 - Offer of Employment Letter, dated January 20, 2010, between the Company and Kathleen Abernathy (filed as Exhibit 10.35 to the Spinco Form 10).* 10.15 - Amendment, dated May 31, 2012, to Offer of Employment...

  • Page 59
    ... as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on April 1, 2010).* 10.30 - Form of Restricted Stock Agreement for CEO (filed as Exhibit 10.32 to the 2009 Form 10-K).* 10.31 - Form of Restricted Stock Agreement for named executive officers other than CEO (filed as Exhibit 10.33...

  • Page 60
    FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES Exhibit No. Description 21.1 - Subsidiaries of the Registrant. 23.1 - Auditors' Consent. 31.1 - Certification of Principal Executive Officer... 10.34 are management contracts or compensatory plans or arrangements. * Incorporated by reference. 59

  • Page 61
    ... has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FRONTIER COMMUNICATIONS CORPORATION (Registrant) February 27, 2013 By: /S/ MARY AGNES WILDEROTTER Mary Agnes Wilderotter Chairman of the Board and Chief Executive Officer Pursuant to the...

  • Page 62
    FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES Index to Consolidated Financial Statements Item Page Management's Report on Internal Control Over Financial Reporting ...Reports of Independent Registered Public Accounting Firm ...Consolidated Balance Sheets as of December 31, 2012 and 2011 ......

  • Page 63
    ... OVER FINANCIAL REPORTING The Board of Directors and Shareholders Frontier Communications Corporation: The management of Frontier Communications Corporation and subsidiaries is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined...

  • Page 64
    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Shareholders Frontier Communications Corporation: We have audited the accompanying consolidated balance sheets of Frontier Communications Corporation and subsidiaries as of December 31, 2012 and 2011, and the related ...

  • Page 65
    ... accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Frontier Communications Corporation and subsidiaries as of December 31, 2012 and 2011, and the related consolidated statements of operations, comprehensive income (loss...

  • Page 66
    ... benefits ...Other liabilities ...Long-term debt ...Equity: Shareholders' equity of Frontier: Common stock, $0.25 par value (1,750,000,000 authorized shares, 998,410,000 and 995,128,000 outstanding, respectively, and 1,027,986,000 issued, at December 31, 2012 and 2011) ...Additional paid-in capital...

  • Page 67
    FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2012, 2011 AND 2010 ($ in thousands, except for per-share amounts) 2012 2011 2010 Revenue ...Operating expenses: Network access expenses ...Other operating expenses ......

  • Page 68
    FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) FOR THE YEARS ENDED DECEMBER 31, 2012, 2011 AND 2010 ($ in thousands) 2012 2011 2010 Net income ...Other comprehensive income (loss), net of tax (see Note 14) ...Comprehensive income ...Less:...

  • Page 69
    FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY FOR THE YEARS ENDED DECEMBER 31, 2012, 2011 AND 2010 ($ and shares in thousands) Frontier Shareholders Accumulated Additional Other Paid-In Retained Comprehensive Capital Earnings Loss Common Stock Shares Amount...

  • Page 70
    FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2012, 2011 AND 2010 ($ in thousands) 2012 2011 2010 Cash flows provided by (used in) operating activities: Net income ...Adjustments to reconcile net income to net cash ...

  • Page 71
    ... or when products are delivered to customers. Revenue that is billed in advance includes: monthly recurring network access services, special access services and monthly recurring local line and unlimited fixed long distance bundle charges. The unearned portion of these fees is initially deferred as...

  • Page 72
    .... During the third quarter of 2011, the Company reorganized into six operating segments in order to leverage the full benefits of its local engagement model. Our operating segments consist of the following regions: Central, Midwest, National, Northeast, Southeast and West. Our operating segments are...

  • Page 73
    ... assets and liabilities using tax rates expected to be in effect when the temporary differences are expected to reverse. (j) Stock Plans: We have various stock-based compensation plans. Awards under these plans are granted to eligible officers, management employees, non-management employees and non...

  • Page 74
    ...Arizona, Idaho, Illinois, Indiana, Michigan, Nevada, North Carolina, Ohio, Oregon, South Carolina, Washington, West Virginia and Wisconsin and in portions of California bordering Arizona, Nevada and Oregon (collectively, the Acquired Territories), including Internet access and long distance services...

  • Page 75
    FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements ($ in thousands) Total transaction consideration: ...Current assets ...Property, plant & equipment ...Goodwill...Other intangibles-primarily customer list...Other noncurrent assets ...Current liabilities...

  • Page 76
    ... and equipment at December 31, 2012 and 2011 are as follows: ($ in thousands) Estimated Useful Lives 2012 2011 Land ...Buildings and leasehold improvements ...General support ...Central office/electronic circuit equipment ...Poles ...Cable and wire...Conduit...Other ...Construction work in progress...

  • Page 77
    ... 31, 2012 December 31, 2011 Payments and Retirements New Borrowings December 31, 2012 Interest Rate at December 31, 2012* ($ in thousands) Senior Unsecured Debt ...Industrial Development Revenue Bonds . . Rural Utilities Service Loan Contracts...TOTAL LONG-TERM DEBT ...Less: Debt Discount...Less...

  • Page 78
    FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Additional information regarding our Senior Unsecured Debt at December 31, 2012 and 2011 is as follows: 2012 ($ in thousands) Principal Outstanding Interest Rate Principal Outstanding 2011 Interest Rate ...

  • Page 79
    ... of $588.1 million from the offering after deducting underwriting fees and offering expenses. The Company intends to use the net proceeds from the sale of the notes to repurchase or retire existing indebtedness or for general corporate purposes. On October 1, 2012, the Company completed a registered...

  • Page 80
    ... 2012: ($ in thousands) Principal Payments 2013 ...2014 ...2015 ...2016 ...2017 ...Other Obligations $ 560,550 $ 257,916 $ 732,746 $ 345,466 $1,041,186 On September 8, 2011, the Company contributed four administrative properties to its qualified defined benefit pension plan. None of the buildings...

  • Page 81
    FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements During 2012, the Company entered into a sale and leaseback arrangement for a facility in Everett, Washington and entered into a capital lease for the use of fiber in the state of Minnesota. These ...

  • Page 82
    ... (10) Capital Stock: We are authorized to issue up to 1,750,000,000 shares of common stock. The amount and timing of dividends payable on common stock are, subject to applicable law, within the sole discretion of our Board of Directors. (11) Stock Plans: At December 31, 2012, we had five stock-based...

  • Page 83
    FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements granted in the form of performance shares. The LTIP is offered under the Company's 2009 Equity Incentive Plan and participants consist of senior vice presidents and above. The LTIP awards have performance...

  • Page 84
    FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements of the Transaction, and to all employees (including senior management) as a Founder's Stock Grant during the third quarter of 2010. The restricted shares granted to senior management vest in three equal ...

  • Page 85
    FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Non-Employee Directors' Compensation Plans Prior to October 1, 2010, non-employee directors received stock options upon joining the Board of Directors. These options were awarded under the Directors' ...

  • Page 86
    FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (12) Income Taxes: The following is a reconciliation of the provision for income taxes computed at federal statutory rates to the effective rates for the years ended December 31, 2012, 2011 and 2010: 2012...

  • Page 87
    FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements The components of the net deferred income tax liability (asset) at December 31 are as follows: ($ in thousands) 2012 2011 Deferred income tax liabilities: Property, plant and equipment basis differences ...

  • Page 88
    ...17,501 (55,614) (97,409) 17,501 $ 20,024 $ (9,066) $132,500 In 2011, we received refunds of $53.9 million generated in part by the 2009 retroactive change in accounting method for repairs and maintenance costs related to tax years 2008 and prior. U.S. GAAP requires applying a "more likely than not...

  • Page 89
    ...and shares in thousands, except per-share amounts) 2012 2011 2010 Net income used for basic and diluted earnings per common share: Net income attributable to common shareholders of Frontier...Less: Dividends paid on unvested restricted stock awards ...Total basic and diluted net income attributable...

  • Page 90
    FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (14).... The components of accumulated other comprehensive loss, net of tax at December 31, 2012, 2011 and 2010 are as follows: ($ in thousands) Pension Costs Postretirement Costs Deferred taxes on pension...

  • Page 91
    ... 17-Retirement Plans for additional details). (15) Segment Information: We operate in one reportable segment. Frontier provides both regulated and unregulated voice, data and video services to business, residential and wholesale customers and is typically the incumbent provider in its service areas...

  • Page 92
    ...significant number of our former and current employees and other postretirement benefit plans that provide medical, dental, life insurance and other benefits for covered retired employees and their beneficiaries and covered dependents. The benefits are based on years of service and final average pay...

  • Page 93
    ... as well as expected pension benefit payment streams. When analyzing anticipated benefit payments, management considers both the absolute amount of the payments as well as the timing of such payments. In 2012, 2011 and 2010, our expected long-term rate of return on plan assets was 7.75%, 8.00% and...

  • Page 94
    ...in thousands) 2012 2011 Change in projected benefit obligation (PBO) PBO at beginning of year ...Service cost ...Interest cost ...Actuarial loss ...Benefits paid ...PBO at end of year ...Change in plan assets Fair value of plan assets at beginning of year ...Actual return on plan assets ...Employer...

  • Page 95
    ... and valuation of the year-end obligations were as follows: 2012 2011 2010 Discount rate-used at year end to value obligation...Discount rate-used to compute annual cost ...Expected long-term rate of return on plan assets ...Rate of increase in compensation levels ...F-34 4.00% 4.50% 7.75% 2.50...

  • Page 96
    ...OPEB costs and valuation of the year-end OPEB obligations were as follows: 2012 2011 2010 Discount rate-used at year end to value obligation ...Discount rate-used to compute annual cost ...Expected long-term rate of return on plan assets...F-35 4.00%-4.20% 4.50%-4.75% 4.00%-3.00% 4.50%-4.75% 5.25...

  • Page 97
    FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements The OPEB plan's expected benefit payments over the next 10 years are as follows: ($ in thousands) Year Gross Benefits Medicare Part D Subsidy Total 2013 2014 2015 2016 2017 2018-2022 Total $ 14,010 15,...

  • Page 98
    ... employee retirement savings plans under section 401(k) of the Internal Revenue Code. The plans cover substantially all full-time employees. Under certain plans, we provide matching contributions. Employer contributions were $23.0 million, $22.2 million and $14.9 million for 2012, 2011 and 2010...

  • Page 99
    ...Corporate and Other Obligations ...Common Stock ...Commingled Funds...Common/Collective Trust Funds ...Interest in Registered Investment Companies ...Interest in Limited Partnerships ...Insurance Contracts ...Other...Total investments, at fair value ...Receivable for Plan Assets of Acquired Business...

  • Page 100
    ... in South America, New Zealand and Australia. The partnerships invest in commercial real estate properties that are leased to the Company. The leases are triple net, whereby the Company is responsible for all expenses, including but not limited to, insurance, repairs and maintenance and payment of...

  • Page 101
    ... (including individual, class and putative class actions) arising in the normal course of our business covering a wide range of matters and types of claims including, but not limited to, general contracts, billing disputes, rights of access, taxes and surcharges, consumer protection, trademark and...

  • Page 102
    ... they carry for us subject to minimum monthly fees. At December 31, 2012, the estimated future payments for obligations under our noncancelable long distance contracts and service agreements are as follows: ($ in thousands) Year Amount 2013...2014...2015...2016...2017...Thereafter...Total ...F-41...

  • Page 103
    ... Public Service Commission of West Virginia ...CNA ...All other...Total ... $40,000 45,659 1,186 $86,845 CNA serves as our agent with respect to general liability claims (auto, workers compensation and other insured perils of the Company). As our agent, they administer all claims and make payments...

  • Page 104
    ...on Frontier's website at www.frontier.com. Copies of the company's 2012 Form 10-K report filed with the U.S. Securities and Exchange Commission and other information about the company may be obtained by telephoning 1-866-491-5249, faxing to 203-614-4602, or e-mailing [email protected]. STOCK TRANSFER AGENT...

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    OUR MISSION Be the leader in providing communications services to residential and business customers in our markets OUR VALUES Put the customer first Treat one another with respect Keep our commitments; Be accountable Be ethical in all of our dealings Be innovative; Take the initiative Be team ...

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    Frontier Communications Corporation Three High Ridge Park Stamford, CT 06905-1390 203-614-5600