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Section 1: 10-Q (10-Q)

ftr-20190930x10q
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________to__________

Commission file number: 001-11001

C:\Users\biantorn\Desktop\logo.gif

FRONTIER COMMUNICATIONS CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

06-0619596

(State or other jurisdiction of

(I.R.S. Employer Identification No.)

incorporation or organization)

401 Merritt 7

Norwalk, Connecticut

06851

(Address of principal executive offices)

(Zip Code)

Registrant's telephone number, including area code: (203) 614-5600

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Name of each exchange on which registered

Ticker Symbol

Common Stock, par value $0.25 per share

The NASDAQ Stock Market LLC

FTR

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “accelerated filer,” “large accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨

Smaller reporting company ¨ Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

The number of shares outstanding of the registrant’s Common Stock as of November 1, 2019 was 105,370,000.


FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

Table of Contents

Page

Part I. Financial Information (Unaudited)

Item 1. Financial Statements

Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018

2

Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018

3

Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2019 and 2018

4

Consolidated Statements of Equity (Deficit) for the three and nine months ended September 30, 2019 and 2018

5

Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018

6

Notes to Consolidated Financial Statements

7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

38

Item 3. Quantitative and Qualitative Disclosures about Market Risk

54

Item 4. Controls and Procedures

55

Part II. Other Information

Item 1. Legal Proceedings

56

Item 1A. Risk Factors

56

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

57

Item 6. Exhibits

58

Signature

59

1


PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

($ in millions and shares in thousands, except for per-share amounts)

(Unaudited)

September 30, 2019

December 31, 2018

ASSETS

Current assets:

Cash and cash equivalents

$

683 

$

354 

Accounts receivable, less allowances of $91 and $105, respectively

654 

723 

Contract acquisition costs

105 

107 

Prepaid expenses

110 

86 

Assets held for sale

1,402 

-

Income taxes and other current assets

55 

60 

Total current assets

3,009 

1,330 

Property, plant and equipment, net

12,973 

14,187 

Goodwill

-

6,383 

Other intangibles, net

1,120 

1,494 

Other assets

459 

265 

Total assets

$

17,561 

$

23,659 

LIABILITIES AND EQUITY (DEFICIT)

Current liabilities:

Long-term debt due within one year

$

994 

$

814 

Accounts payable

453 

495 

Advanced billings

227 

256 

Accrued other taxes

213 

182 

Accrued interest

294 

381 

Pension and other postretirement benefits

39 

39 

Liabilities held for sale

134 

-

Other current liabilities

386 

394 

Total current liabilities

2,740 

2,561 

Deferred income taxes

580 

1,109 

Pension and other postretirement benefits

1,641 

1,750 

Other liabilities

398 

281 

Long-term debt

16,305 

16,358 

Equity (Deficit):

Common stock, $0.25 par value (175,000 authorized shares,

106,025 issued, and 105,370 and 105,536 outstanding

at September 30, 2019 and December 31, 2018, respectively)

27 

27 

Additional paid-in capital

4,810 

4,802 

Accumulated deficit

(8,411)

(2,752)

Accumulated other comprehensive loss, net of tax

(517)

(463)

Treasury common stock

(12)

(14)

Total equity (deficit)

(4,103)

1,600 

Total liabilities and equity (deficit)

$

17,561 

$

23,659 

The accompanying Notes are an integral part of these unaudited Consolidated Financial Statements.


2


PART I. FINANCIAL INFORMATION (Continued)

FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

($ in millions and shares in thousands, except for per-share amounts)

(Unaudited)

For the three months ended

For the nine months ended

September 30,

September 30,

2019

2018

2019

2018

Revenue

$

1,997 

$

2,126 

$

6,165 

$

6,487 

Operating expenses:

Network access expenses

307 

353 

963 

1,094 

Network related expenses

464 

476 

1,365 

1,437 

Selling, general and administrative expenses

445 

445 

1,346 

1,374 

Depreciation and amortization

422 

471 

1,360 

1,462 

Goodwill impairment

276 

400 

5,725 

400 

Loss on disposal of Northwest Operations

30 

-

414 

-

Restructuring costs and other charges

27 

14 

86 

20 

Total operating expenses

1,971 

2,159 

11,259 

5,787 

Operating income (loss)

26 

(33)

(5,094)

700 

Investment and other income (loss), net

(10)

3 

(28)

16 

Pension settlement costs

-

9 

-

34 

Gain (loss) on extinguishment of debt

-

(2)

(20)

31 

Interest expense

382 

389 

1,144 

1,148 

Loss before income taxes

(366)

(430)

(6,286)

(435)

Income tax benefit

(21)

(4)

(537)

(11)

Net loss

(345)

(426)

(5,749)

(424)

Less: Dividends on preferred stock

-

-

-

107 

Net loss attributable to

Frontier common shareholders

$

(345)

$

(426)

$

(5,749)

$

(531)

Basic and diluted net loss per share

attributable to Frontier common shareholders

$

(3.31)

$

(4.11)

$

(55.26)

$

(6.09)

Total weighted average shares outstanding

- basic and diluted

104,135 

103,665 

104,031 

87,138 

The accompanying Notes are an integral part of these unaudited Consolidated Financial Statements.


3


PART I. FINANCIAL INFORMATION (Continued)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

($ in millions)

(Unaudited)

For the three months ended

For the nine months ended

September 30,

September 30,

2019

2018

2019

2018

Net loss

$

(345)

$

(426)

$

(5,749)

$

(424)

Other comprehensive income (loss), net of tax

8 

(34)

25 

36