Frontier Communications 2014 Annual Report Download - page 106

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The Federal Communications Commission (FCC) and certain state regulatory commissions, in
connection with granting their approvals of the 2010 Acquisition, specified certain capital expenditure
and operating requirements for the territories acquired in the 2010 Acquisition for specified periods of
time post-closing. These requirements focus primarily on certain capital investment commitments to
expand broadband availability to at least 85% of the households throughout the territories acquired in
the 2010 Acquisition with minimum download speeds of 3 megabits per second (Mbps) by the end of
2013. We are also required to provide download speeds of 4 Mbps to at least 75%, 80% and 85% of
the households throughout the territories acquired in the 2010 Acquisition by the end of 2013, 2014
and 2015, respectively. As of December 31, 2012, we met our FCC requirement to provide 4 Mbps
coverage to 75% and 80% of the households in the territories acquired in the 2010 Acquisition by the
end of 2013 and 2014, respectively. As of December 31, 2013, we met our FCC requirement to provide
3 Mbps coverage to 85% of the households in the territories acquired in the 2010 Acquisition by the
end of 2013. As of December 31, 2014, we expanded broadband availability in excess of 4 Mbps to
84.5% of the households throughout the territories acquired in the 2010 Acquisition.
As of December 31, 2014, all capital investment commitment requirements of the three state
regulatory commissions in connection with the 2010 Acquisition had been satisfied. All funds had been
released from escrow accounts and the Company had no restricted cash related to escrow accounts.
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 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, 2014 are as follows:
($ in thousands)
Operating
Leases
Year ending December 31:
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 59,833
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,716
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,951
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,725
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,803
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,052
Total minimum lease payments. . . . . . . . . . . . . . . . . . . . . $132,080
F-45
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements