Frontier Communications 2013 Annual Report Download - page 43

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Presentation of Comprehensive Income
In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update
No. 2013-02 (ASU 2013-02), “Comprehensive Income: Reporting of Amounts Reclassified Out of
Accumulated Other Comprehensive Income,” (ASC Topic 220). ASU 2013-02 requires disclosing the effect
of reclassifications out of accumulated other comprehensive income on the respective line items in the
components of net income in circumstances when U.S. GAAP requires the item to be reclassified in its entirety
to net income. This new guidance was to be applied prospectively. The Company adopted ASU 2013-02 during
the fourth quarter of 2012 with no impact on our financial position, results of operations or cash flows.
Internal Control—Integrated Framework
On May 14, 2013, the Committee of Sponsoring Organizations of the Treadway Commission (COSO)
issued its updated Internal Control—Integrated Framework (the 2013 Framework) and related illustrative
documents. COSO will continue to make available its original Framework during the transition period
extending to December 15, 2014. The Company currently utilizes COSO’s original Framework, which was
published in 1992 and is recognized as the leading guidance for designing, implementing and conducting
internal controls over external financial reporting and assessing its effectiveness. The 2013 Framework is
expected to help organizations design and implement internal control in light of many changes in business and
operating environments since the issuance of the original Framework, broaden the application of internal
control in addressing operations and reporting objectives, and clarify the requirements for determining what
constitutes effective internal control. We plan to adopt the 2013 Framework in 2014 and do not expect that it
will have a significant impact on the Company.
(b) Results of Operations
REVENUE
Revenue is generated primarily through the provision of voice services, data services, video services,
network access, carrier services and other Internet services. Such revenues are generated through either a
monthly recurring fee or a fee based on usage, and revenue recognition is not dependent upon significant
judgments by management, with the exception of a determination of a provision for uncollectible amounts.
Revenue for 2013 decreased $250.3 million, or 5%, to $4,761.6 million as compared to 2012. The decline
in 2013 is primarily the result of decreases in voice revenues and lower switched and nonswitched access
revenue, partially offset by an increase in data services revenue, each as described in more detail below.
Additionally, wireless revenue decreased by $32.4 million in 2013 due to the sale of our Mohave Cellular
Limited Partnership (Mohave) interest on April 1, 2013.
Switched access and subsidy revenue of $551.6 million represented 12% of our revenues for 2013.
Switched access revenue was $234.5 million in 2013, or 5% of our revenues, down from $282.3 million, or 6%
of our revenues, for 2012. Subsidy revenue was $317.1 million in 2013, or 7% of our revenues, down slightly
from $324.6 million, or 6% of our revenues, in 2012. We expect declining revenue trends in switched access
and subsidy revenue to continue in 2014.
Revenue for 2012 decreased $231.2 million, or 4%, to $5,011.9 million as compared to 2011. The decline
in 2012 was primarily the result of decreases in the number of business and residential customers and switched
access revenue, partially offset by an increase in subsidies revenue, each as described in more detail below.
During 2013, we lost 98,900 customers, as compared to a loss of 240,500 customers in 2012 and 375,400
customers in 2011. We believe the improved customer retention in 2013 as compared to prior years is
principally due to our investments in our network, our local engagement strategy, improved customer service
and simplified products and pricing.
Average monthly residential revenue per customer (residential ARPC) increased $0.97, or 2%, to $59.30
during 2013 as compared to 2012. Total residential revenue for the year ended December 31, 2013 declined
$99.4 million, or 5%, as compared to the year ended December 31, 2012, primarily as a result of decreases in
local voice and long distance revenues and the sale of our interest in the Mohave partnership, partially offset by
42
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES