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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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 153,314 $ 157,608 $ 155,717
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,266,807 1,403,175 893,719
Stock based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,775 14,209 14,473
Pension/OPEB costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,087 23,897 40,050
Losses on early extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,363 — —
Other non-cash adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,319 (28,036) 10,072
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,501 87,411 85,432
Change in accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,813 (72,600) (33,146)
Change in accounts payable and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (148,906) (84,689) 106,433
Change in prepaid expenses, income taxes and other current assets. . . . . . . . . . . . . . 11,400 71,706 (50,570)
Net cash provided by operating activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,552,473 1,572,681 1,222,180
Cash flows provided from (used by) investing activities:
Capital expenditures—Business operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (748,407) (748,361) (480,888)
Capital expenditures—Integration activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (54,097) (76,478) (96,991)
Network expansion funded by Connect America Fund . . . . . . . . . . . . . . . . . . . . . . . . . . (4,830) — —
Grant funds received for network expansion from Connect America Fund . . . . . . . 65,981 — —
Cash transferred from (to) escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,020 43,012 (115,000)
Cash paid for the Acquired Business (net of cash acquired). . . . . . . . . . . . . . . . . . . . . — — (82,560)
Other assets purchased and distributions received, net . . . . . . . . . . . . . . . . . . . . . . . . . . 4,394 19,155 1,484
Net cash used by investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (634,939) (762,672) (773,955)
Cash flows provided from (used by) financing activities:
Long-term debt borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,360,625 575,000 —
Financing costs paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (27,852) (5,444) (12,868)
Long-term debt payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (756,953) (552,394) (7,236)
Premium paid to retire debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (72,290) — —
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (399,390) (746,387) (529,389)
Repayment of customer advances for construction, distributions to
noncontrolling interests and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,236) (5,953) (6,162)
Net cash provided from (used by) financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,904 (735,178) (555,655)
Increase (decrease) in cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,438 74,831 (107,430)
Cash and cash equivalents at January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 326,094 251,263 358,693
Cash and cash equivalents at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,326,532 $ 326,094 $ 251,263
Supplemental cash flow information:
Cash paid (received) during the period for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 636,485 $ 653,500 $ 511,354
Income taxes (refunds). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,715 $ (33,072) $ 19,885
Non-cash investing and financing activities:
Capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,596 $ — $ —
Financing obligation for contribution of real property to pension plan . . . . . . . . . . . $ — $ 58,100 $ —
Reduction of pension obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ (58,100) $ —
Shares issued for the Acquired Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ — $5,217,899
Assumed debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ — $3,456,782
Other acquired liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ — $ 987,510
Increase (decrease) in capital expenditures due to changes in accounts payable . . $ 9,802 $ 1,338 $ (43,978)
The accompanying Notes are an integral part of these Consolidated Financial Statements.
F-9