Frontier Communications 2012 Annual Report Download - page 34

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 integration—related capital
expenditures) and $577.9 million (including $97.0 million of integration-related capital expenditures),
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 for business operations to decrease in 2013 to
approximately $625 million to $675 million due to the completion of all integration activities and the planned
completion of geographic broadband expansion requirements established in connection with regulatory approval
of the Transaction.
Acquisitions
On July 1, 2010, Frontier issued common shares with a value of $5.2 billion and made payments of $105.0
million in cash as consideration for the Acquired Business. In addition, as part of the Transaction, Frontier
assumed $3.5 billion in debt.
Cash Flows used by and provided from Financing Activities
Debt Financings
On May 17, 2012, we completed a registered offering of $500 million aggregate principal amount of
9.250% senior unsecured notes due 2021, issued at a price of 100% of their principal amount. We received net
proceeds of $489.6 million from the offering after deducting underwriting fees and offering expenses. The
Company also commenced a tender offer to purchase the maximum aggregate principal amount of its 8.250%
Senior Notes due 2014 (the 2014 Notes) and its 7.875% Senior Notes due 2015 (the April 2015 Notes and,
together with the 2014 Notes, the Notes) that it could purchase for up to $500 million in cash (the Debt Tender
Offer). The 2014 Notes had an effective interest cost of 10.855%, reflecting the fact that such notes were issued
at a discount in April 2009.
On August 15, 2012, the Company completed a registered offering of $600 million aggregate principal
amount of 7.125% senior unsecured notes due 2023 (the 2023 Notes), issued at a price of 100% of their
principal amount. We received net proceeds 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 debt offering of $250 million aggregate
principal amount of the 2023 Notes, issued at a price of 104.250% of their principal amount, equating to an
effective yield of 6.551%. We received net proceeds of $255.9 million from the offering after deducting
underwriting fees and offering expenses. The notes are an additional issuance of, are fully fungible with and
form a single series voting together as one class with the $600 million aggregate principal amount of the 2023
Notes issued by the Company on August 15, 2012. 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.
Debt Reduction
In 2012, we retired an aggregate principal amount of $757.0 million of debt, consisting of $756.1 million
of senior unsecured debt and $0.9 million of rural utilities service loan contracts. Additionally, on January 15,
2013, we retired $502.7 million of our 6.25% Senior Notes due 2013 with cash on hand.
Pursuant to the Debt Tender Offer, the Company accepted for purchase $400 million aggregate principal
amount of 2014 Notes, tendered for total consideration of $446.0 million, and $49.5 million aggregate principal
amount of April 2015 Notes, tendered for total consideration of $54.0 million. Frontier used proceeds from the
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FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES