Frontier Communications 2012 Annual Report Download - page 37

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 regulation, other than that imposed by the General Corporation Law of the State of Delaware.
However, we would be restricted under the Credit Agreement, the Revolving Credit Agreement and the Letter
of Credit Agreement from declaring dividends if an event of default occurred and was continuing at the time or
would result from the dividend declaration.
The Credit Agreement and the Revolving Credit Agreement each contain a maximum leverage ratio
covenant. Under those covenants, we are required to maintain a ratio of (i) total indebtedness minus cash and
cash equivalents (including restricted cash) in excess of $50.0 million to (ii) consolidated adjusted EBITDA (as
defined in the agreements) over the last four quarters no greater than 4.50 to 1. At December 31, 2012, the ratio
of our net debt to adjusted operating cash flow (leverage ratio) was 3.17 times.
The Credit Agreement, the Revolving Credit Agreement, the Letter of Credit Agreement and certain
indentures for our senior unsecured debt obligations limit our ability to create liens or merge or consolidate
with other companies and our subsidiaries’ ability to borrow funds, subject to important exceptions and
qualifications.
As of December 31, 2012, we were in compliance with all of our debt and credit facility covenants.
Dividends
We intend to pay regular quarterly dividends. Our ability to fund a regular quarterly dividend could be
impacted by our ability to generate cash from operations. The declarations and payment of future dividends will
be at the discretion of our Board of Directors, and will depend upon many factors, including our financial
condition, results of operations, growth prospects, funding requirements, applicable law, restrictions in
agreements governing our indebtedness and other factors our Board of Directors deem relevant.
Off-Balance Sheet Arrangements
We do not maintain any off-balance sheet arrangements, transactions, obligations or other relationships
with unconsolidated entities that would be expected to have a material current or future effect upon our
financial statements.
Future Commitments
A summary of our future contractual obligations and commercial commitments as of December 31, 2012
is as follows:
Contractual Obligations:
($ in thousands) Total 2013 2014-2015 2016-2017 Thereafter
Payment due by period
Long-term debt obligations,
excluding interest ................... $ 8,942,568 $ 560,550 $ 990,662 $1,386,652 $6,004,704
Interest on long-term debt . . . .......... 6,786,739 678,872 1,274,919 1,130,201 3,702,747
Operating lease obligations . . .......... 182,174 95,323 30,415 14,685 41,751
Capital lease obligations............... 38,199 3,055 6,268 6,489 22,387
Financing lease obligations . . .......... 81,016 5,339 10,446 10,957 54,274
Purchase obligations .................. 95,205 48,338 36,799 8,868 1,200
“Take or pay” contract obligations ..... 414,600 132,000 282,600 — —
Liability for uncertain tax positions . . . . 13,625 6,973 6,177 475 —
Total ............................ $16,554,126 $1,530,450 $2,638,286 $2,558,327 $9,827,063
At December 31, 2012, we had outstanding performance letters of credit totaling $86.8 million.
In our normal course of business we have obligations under certain non-cancelable arrangements for
services. During 2012, we entered into a “take or pay” arrangement for the purchase of future long distance and
36
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES