Frontier Communications 2013 Annual Report Download - page 104

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download speeds of 3 megabits per second (Mbps) by the end of 2013. We are required to provide download
speeds of 4 Mbps to at least 75%, 80% and 85% of the households throughout the Acquired Territories by the
end of 2013, 2014 and 2015, respectively. As of December 31, 2013, we had expanded broadband availability
in excess of 3 Mbps to 85.4% of the households throughout the Acquired Territories, and in excess of 4 Mbps
to 83.5% of the households throughout the Acquired Territories. Accordingly, we have met our FCC
requirement to provide 3 Mbps coverage to 85% of the households and 4 Mbps coverage to 75% of the
households in the Acquired Territories by the end of 2013. We have also met our FCC requirement to provide 4
Mbps coverage to 80% of the households in the Acquired Territories by the end of 2014.
To satisfy all or part of certain capital investment commitments to three state regulatory commissions, we
placed an aggregate amount of $115.0 million in cash into escrow accounts and obtained a letter of credit for
$190 million in 2010. Another $72.4 million of cash in an escrow account was acquired in connection with the
2010 Transaction to be used for service quality initiatives in the state of West Virginia. As of December 31,
2013, $176.3 million had been released from the escrow accounts and the Company had a restricted cash
balance in the remaining escrow account in the aggregate amount of $11.4 million, including interest earned.
The aggregate amount of the escrow account will continue to decrease over time as Frontier makes the required
capital expenditures in West Virginia. In September 2013, the letter of credit for the remaining $20 million
expired.
We are party to various legal proceedings (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 patent infringement, employment, regulatory, tort, claims of competitors and disputes with other
carriers.
We accrue an expense for pending litigation when we determine that an unfavorable outcome is probable
and the amount of the loss can be reasonably estimated. Legal defense costs are expensed as incurred. None of
our existing accruals, after considering insurance coverage, for pending matters is material. We constantly
monitor our pending litigation for the purpose of adjusting our accruals and revising our disclosures
accordingly, when required. Litigation is, however, subject to uncertainty, and the outcome of any particular
matter is not predictable. We will vigorously defend our interests for pending litigation, and as of this date, we
believe that the ultimate resolution of all such matters, after considering insurance coverage or other
indemnities to which we are entitled, will not have a material adverse effect on our consolidated financial
position, results of operations, or our cash flows.
We conduct certain of our operations in leased premises and also lease certain equipment and other assets
pursuant to operating leases. The lease arrangements have terms ranging from 1 to 99 years and several contain
rent escalation clauses providing for increases in monthly rent at specific intervals. When rent escalation
clauses exist, we record annual rental expense based on the total expected rent payments on a straight-line basis
over the lease term. Certain leases also have renewal options. Renewal options that are reasonably assured are
included in determining the lease term.
Future minimum rental commitments for all long-term noncancelable operating leases as of December 31,
2013 are as follows:
($ in thousands)
Operating
Leases
Year ending December 31:
2014. . . ................................................ $ 61,880
2015. . . ................................................ 10,452
2016. . . ................................................ 8,804
2017. . . ................................................ 7,708
2018. . . ................................................ 7,393
Thereafter . . ................................................ 49,091
Total minimum lease payments ......................... $145,328
F-42
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements