Frontier Communications 2013 Annual Report Download - page 33

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principally fund all of our cash investing and financing activities, primarily capital expenditures, dividends and
debt repayments.
In 2013, the Company completed a registered debt offering of $750.0 million in senior unsecured debt. In
addition, we retired an aggregate principal amount of $1.6 billion 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 that we believe provides
sufficient flexibility to meet our liquidity needs. As of December 31, 2013, we had not made any borrowings
under this facility.
At December 31, 2013, we had a working capital surplus of $317.3 million. 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 for the next twelve months.
However, a number of factors, including but not limited to, losses of customers, pricing pressure from increased
competition, lower subsidy and switched access revenues, and the impact of the current economic environment
may negatively impact our cash generated from operations. In addition, based on information available to us,
we believe that the financial institutions syndicated under our revolving credit facility would be able to fulfill
their commitments to us, but this could change in the future. As of December 31, 2013, we had $257.9 million
and $259.8 million of debt maturing in 2014 and 2015, respectively.
Cash Flows provided by Operating Activities
Cash flows provided by operating activities declined $56.8 million, or 4%, in 2013 as compared to 2012.
The decrease was primarily the result of lower revenue and net income before depreciation and amortization
during 2013.
We paid $94.2 million in net cash taxes in 2013 as compared to $4.7 million in net cash taxes in 2012,
while cash refunds (net of cash taxes paid) for taxes of $33.1 million were received in 2011. Our 2013 cash
taxes paid reflects the continued impact of bonus depreciation in accordance with the American Taxpayer
Relief Act of 2012. Absent any legislative changes in 2014, we expect that our cash tax payments will be
approximately $130 million to $160 million for 2014 for our current business operations and our estimated pre-
close integration expenditures.
During 2013, the Company contributed four real estate properties with a fair value of $23.4 million to its
qualified defined benefit pension plan. The pension plan obtained independent appraisals of the properties and,
based on these appraisals, the pension plan recorded the contributions at their fair value. The Company is
leasing back the properties from its pension plan for 15 years at a combined aggregate annual rent of $2.1
million. The properties are managed on behalf of the pension plan by an independent fiduciary, and the terms
of the leases were negotiated with the fiduciary on an arm’s-length basis.
During 2011, the Company contributed four real estate properties to its qualified defined benefit pension
plan. The pension plan recorded the contributions at their fair value of $58.1 million and the Company entered
into leases for the contributed properties for 15 years at a combined aggregate annual rent of $5.8 million.
In connection with the 2010 Transaction, the Company undertook a variety of activities to integrate
systems and implement other initiatives. As a result of the 2010 Transaction, the Company incurred $81.7
million of costs related to integration activities during 2012, as compared to $143.1 million of integration costs
in 2011. All integration activities related to the 2010 Transaction were completed as of the end of 2012.
In connection with the pending AT&T Transaction, the Company recognized $9.7 million of acquisition
costs incurred in 2013 and $1.3 million of interest expense related to the Bridge Facility commitment. The
Company expects to incur operating expenses of approximately $140 million to $170 million in 2014 related to
integration activities for the pending AT&T Transaction.
32
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES