Frontier Communications 2012 Annual Report Download - page 32

Download and view the complete annual report

Please find page 32 of the 2012 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 106

  • 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

•The effects of changes in income tax rates, tax laws, regulations or rulings, or federal or state tax
assessments;
•Our ability to successfully renegotiate union contracts in 2013 and thereafter;
•Changes in pension plan assumptions and/or the value of our pension plan assets, which could require us
to make increased contributions to the pension plan in 2013 and beyond;
•The effects of customer bankruptcies and home foreclosures, which could result in difficulty in
collection of revenues and loss of customers;
•Adverse changes in the credit markets or in the ratings given to our debt securities by nationally
accredited ratings organizations, which could limit or restrict the availability, or increase the cost, of
financing;
•Our cash flow from operations, amount of capital expenditures, debt service requirements, cash paid for
income taxes and liquidity may affect our payment of dividends on our common shares;
•The effects of state regulatory cash management practices that could limit our ability to transfer cash
among our subsidiaries or dividend funds up to the parent company; and
•The effects of severe weather events such as hurricanes, tornadoes, ice storms or other natural or man-
made disasters.
Any of the foregoing events, or other events, could cause financial information to vary from
management’s forward-looking statements included in this report. You should consider these important
factors, as well as the risks set forth under Item 1A. “Risk Factors,” in evaluating any statement in this report
on Form 10-K or otherwise made by us or on our behalf. The following information is unaudited and should be
read in conjunction with the consolidated financial statements and related notes included in this report. We
have no obligation to update or revise these forward-looking statements and do not undertake to do so.
Investors should also be aware that while we do, at various times, communicate with securities analysts, it
is against our policy to disclose to them selectively any material non-public information or other confidential
information. Accordingly, investors should not assume that we agree with any statement or report issued by an
analyst irrespective of the content of the statement or report. To the extent that reports issued by securities
analysts contain any projections, forecasts or opinions, such reports are not our responsibility.
(a) Liquidity and Capital Resources
As of December 31, 2012, we had cash and cash equivalents aggregating $1,326.5 million (excluding total
restricted cash of $42.7 million, representing funds escrowed for future broadband expansion and service
quality initiatives). Our primary source of funds continued to be cash generated from operations. For the year
ended December 31, 2012, we used cash flow from operations, cash on hand and debt proceeds to fund
principally all of our cash investing and financing activities, primarily capital expenditures, dividends and debt
repayments.
In 2012, the Company completed three registered debt offerings totaling $1.4 billion in senior unsecured
debt. In addition, we retired an aggregate principal amount of $757.0 million of debt. See “Cash Flows used by
and provided from Financing Activities—Debt Financings and Debt Reductions” below for further discussion.
We have a revolving credit facility with a line of credit of $750.0 million. We have not made any
borrowings from this facility.
At December 31, 2012, we had a working capital surplus of $533.7 million, which includes the
classification of $502.7 million of our 6.25% Senior Notes due 2013, maturing in the first quarter of 2013, as a
current liability and which was retired on January 15, 2013 with cash on hand. We believe our operating cash
flows, existing cash balances, and existing revolving credit facility will be adequate to finance our working
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 pressure from increased competition,
lower subsidy and switched access revenues and the impact of the current economic environment are expected
31
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES