Frontier Communications Reports 2012 Fourth Quarter and Full Year Results

• 2012 full year free cash flow of $975 million
• 2012 full year operating cash flow margin of 48%, as adjusted
• 2012 full year dividend payout ratio of 41%
• 2012 full year capital expenditures of $748 million in line with guidance
• 2012 full year average revenue per customer metrics improved versus the prior year

STAMFORD, Conn.--(BUSINESS WIRE)-- Frontier Communications Corporation (NASDAQ: FTR) today reported fourth quarter 2012 revenue of $1,232.6 million, operating income of $235.7 million and net income attributable to common shareholders of Frontier of $24.9 million, or $0.02 per share. Excluding severance costs of $17.2 million, integration costs of $13.5 million, losses on the early extinguishment of debt of $19.3 million and discrete tax items of $0.4 million (combined impact of $33.0 million or $0.04 per share after tax), non-GAAP adjusted net income attributable to common shareholders of Frontier for the fourth quarter of 2012 would be $57.9 million, or $0.06 per share.

"During 2012, we successfully completed the integration of our July 2010 acquisition which tripled the size of the Company," said Maggie Wilderotter, Chairman and CEO of Frontier Communications. "We completed all of the system conversions, achieved cost savings of over $650 million, dramatically improved our network's speed and capacity and have identified additional cost reductions of $140 million for achievement in 2013 related to continuing operational streamlining which will be partially offset by investments in growth initiatives.

"Our fourth quarter revenue was slightly lower than anticipated; mostly attributable to a decline in voice revenues as customers chose unlimited residential voice packages and standalone Simply Broadband options. Positives for the quarter versus third quarter of 2012 included continued improvement in both consumer customer retention and average revenue per business customer. Our Q4 Apple gift card promotion gained traction in December which has carried over into January 2013. Cash operating expenses also improved quarter over quarter when the one time expenses for storm costs and gift card promotion costs are factored out."

Revenue for the fourth quarter of 2012 was $1,232.6 million as compared to $1,252.5 million in the third quarter of 2012 and $1,283.2 million in the fourth quarter of 2011. The decrease in revenue for the fourth quarter of 2012 as compared to the fourth quarter of 2011 is attributable to decreases in the number of residential and business customers, and lower switched and nonswitched revenue.

At December 31, 2012, the Company had 2,887,100 residential customers and 286,100 business customers. During the three months ended December 31, 2012, we lost approximately 50,400 customers as compared to 51,800 customers in the three months ended September 30, 2012 and 65,700 customers in the three months ended June 30, 2012. Also, during the most recent quarter, the average monthly total revenue per customer remained consistent with the third quarter of 2012 and increased $4.63, or 4%, as compared with the fourth quarter of 2011.

The Company's broadband customer net additions were approximately 5,300 during the fourth quarter of 2012. The Company had 1,787,600 broadband customers at December 31, 2012. The Company added 20,900 satellite TV customers and lost 2,800 FiOS video customers during the fourth quarter of 2012. The Company had 346,600 video customers at December 31, 2012.

Network access expenses for the fourth quarter of 2012 were $108.5 million as compared to $102.1 million in the third quarter of 2012 and $120.8 million in the fourth quarter of 2011. The Company incurred promotion costs of $5.5 million in the fourth quarter of 2012 related to its Apple gift card promotion.

Other operating expenses for the fourth quarter of 2012 were $570.7 million as compared to $572.3 million in the third quarter of 2012 and $548.6 million in the fourth quarter of 2011. The Company incurred storm related expenses of approximately $6.8 million in the fourth quarter of 2012 and $15 million in the third quarter of 2012. Included in other operating expenses were severance costs of $17.2 million in the fourth quarter of 2012, $6.8 million in the third quarter of 2012 and $1.1 million in the fourth quarter of 2011. The fourth quarter of 2012 severance cost relates to 537 employees leaving the business in connection with the Company's plan to reduce both wage and non-wage costs following the completion of its integration activities. In the fourth quarter 2012, other operating expenses were less than the third quarter of 2012, excluding severance costs in both periods, by $12.0 million primarily due to decreased compensation costs resulting from reduced headcount and lower storm related costs.

Depreciation and amortization for the fourth quarter of 2012 was $304.0 million as compared to $298.4 million in the third quarter of 2012 and $341.0 million in the fourth quarter of 2011. Amortization expense decreased by $42.5 million in the fourth quarter of 2012 as compared to the fourth quarter of 2011, primarily due to the accelerated amortization in the fourth quarter of 2011 of certain software licenses no longer required for operations and the amortization associated with certain Frontier legacy properties that were fully amortized in March 2012.

Integration costs of approximately $13.5 million ($0.01 per share after tax) were incurred during the fourth quarter of 2012, as compared to approximately $4.5 million in the third quarter of 2012 and $42.2 million ($0.03 per share after tax) in the fourth quarter of 2011, in connection with our integration of the acquired properties. These non-recurring costs in the fourth quarter of 2012 were principally incurred in connection with final network and operations integration work and the consolidation of certain facilities. Our integration costs and related capital expenditures were completed as of December 31, 2012.

Operating income for the fourth quarter of 2012 was $235.7 million (reflecting lower depreciation and amortization, integration costs and network access expenses as compared to the fourth quarter of 2011) and operating income margin was 19.1 percent as compared to operating income of $275.2 million and operating income margin of 22.0 percent in the third quarter of 2012 and operating income of $230.5 million and operating income margin of 18.0 percent in the fourth quarter of 2011.

Excluding integration costs and severance costs, operating income and operating income margin for the three months ended December 31, 2012 would have been $266.5 million and 21.6 percent, respectively. Excluding the comparable adjustments in each period, operating income and operating income margin for the three months ended September 30, 2012 would have been $286.5 million and 22.9 percent, respectively, and for the three months ended December 31, 2011 would have been $273.8 million and 21.3 percent, respectively. Operating income, excluding integration costs and severance costs, decreased $20.0 million in the fourth quarter of 2012 as compared to the third quarter of 2012 principally due to lower revenue.

Losses on early extinguishment of debt for the fourth quarter of 2012 of $19.3 million ($0.01 per share after tax) substantially represents the premium paid on the early extinguishment of Company debt. In October 2012, the Company accepted for purchase $75.7 million and $59.3 million aggregate principal amount of its 7.875% Senior Notes due 2015 and its 8.250% Senior Notes due 2017, respectively, in open market repurchases for total consideration of $154.7 million, representing a loss of $19.7 million that was partially offset by $0.4 million of debt premium amortization.

Interest expense for the fourth quarter of 2012 was $178.9 million as compared to $165.2 million in the fourth quarter of 2011, a $13.7 million increase, primarily due to higher average debt levels and lower capitalized interest in 2012. In October 2012, the Company completed a registered offering of $250 million aggregate principal amount of 7.125% senior unsecured notes due 2023, issued at a price of 104.250% of their principal amount, equating to an effective yield of 6.551%. We received net proceeds of approximately $255.9 million from the offering which we will use to repurchase or retire our existing indebtedness or for general corporate purposes.

Income tax expense for the fourth quarter of 2012 was $9.5 million as compared to $21.5 million in the fourth quarter of 2011, a $12.0 million decrease, principally due to lower pretax income and the increased impact of the reversal of uncertain tax positions.

Net income attributable to common shareholders of Frontier was $24.9 million, or $0.02 per share, in the fourth quarter of 2012, as compared to $42.2 million, or $0.04 per share, in the fourth quarter of 2011. The fourth quarter of 2012 includes severance costs of $17.2 million, integration costs of $13.5 million , losses on the early extinguishment of debt of $19.3 million and discrete tax items of $0.4 million (combined impact of $33.0 million or $0.04 per share after tax). Excluding the impact of the aforementioned items, non-GAAP adjusted net income attributable to common shareholders of Frontier for the fourth quarter of 2012 would be $57.9 million, or $0.06 per share.

Capital expenditures for Frontier business operations were $177.3 million for the fourth quarter of 2012 and $748.4 million for the full year of 2012. Capital expenditures related to integration activities were $15.3 million for the fourth quarter of 2012 and $54.1 million for the full year of 2012.

Operating cash flow, as adjusted and defined by the Company in the attached Schedule B, was $574.4 million for the fourth quarter of 2012 resulting in an operating cash flow margin of 46.6 percent. Operating cash flow, as reported, of $539.8 million for the fourth quarter of 2012 has been adjusted to exclude $17.2 million of severance costs, $13.5 million of integration costs and $3.9 million of non-cash pension and other postretirement benefit costs.

Free cash flow, as defined by the Company in the attached Schedule A, was $222.0 million for the fourth quarter of 2012 and $975.3 million for the full year of 2012. The Company's dividend represents a payout of 45 percent of free cash flow for the fourth quarter of 2012 and 41 percent of free cash flow for the full year of 2012.

Working Capital

At December 31, 2012, we had a working capital surplus of $533.7 million, which includes the classification as a current liability, of $502.7 million of debt maturing in the first quarter of 2013. During 2012, we retired an aggregate principal amount of $757.0 million of debt. On January 15, 2013, we retired $502.7 million of our 6.25% senior notes that matured on such date. The repayment was made with cash available on hand.

Guidance

For the full year of 2013, the Company's expectations for capital expenditures and free cash flow are within a range of $625 million to $675 million and $825 million to $925 million, respectively. We expect that in 2013, absent any further legislative changes in 2013, our cash taxes will be in the range of $125 million to $150 million.

Non-GAAP Measures

The Company uses certain non-GAAP financial measures in evaluating its performance. These include non-GAAP adjusted net income attributable to common shareholders of Frontier, free cash flow and operating cash flow. A reconciliation of the differences between non-GAAP adjusted net income attributable to common shareholders of Frontier, free cash flow and operating cash flow and the most comparable financial measures calculated and presented in accordance with GAAP is included in the tables that follow. The non-GAAP financial measures are by definition not measures of financial performance under GAAP, and are not alternatives to operating income or net income attributable to common shareholders of Frontier as reflected in the statement of operations or to cash flow as reflected in the statement of cash flows, and are not necessarily indicative of cash available to fund all cash flow needs. The non-GAAP financial measures used by the Company may not be comparable to similarly titled measures of other companies.

The Company believes that the presentation of non-GAAP financial measures provides useful information to investors regarding the Company's financial condition and results of operations because these measures, when used in conjunction with related GAAP financial measures, (i) together provide a more comprehensive view of the Company's core operations and ability to generate cash flow, (ii) provide investors with the financial analytical framework upon which management bases financial, operational, compensation and planning decisions and (iii) presents measurements that investors and rating agencies have indicated to management are useful to them in assessing the Company and its results of operations. In addition, the Company believes that non-GAAP adjusted net income attributable to common shareholders of Frontier, free cash flow and operating cash flow, as the Company defines them, can assist in comparing performance from period to period, without taking into account factors affecting operating income or net income attributable to common shareholders of Frontier in the statement of operations, or cash flow reflected in the statement of cash flows, including changes in working capital and the timing of purchases and payments. The Company has shown adjustments to its financial presentations to exclude losses on the early extinguishment of debt, investment gains, discrete tax items, integration costs, severance costs and non-cash pension and other postretirement benefit costs, as disclosed in the attached Schedules A, B and C, because investors have indicated to management that such adjustments are useful to them in assessing the Company and its results of operations.

Management uses these non-GAAP financial measures to (i) assist in analyzing the Company's underlying financial performance from period to period, (ii) evaluate the financial performance of its business units, (iii) analyze and evaluate strategic and operational decisions, (iv) establish criteria for compensation decisions, and (v) assist management in understanding the Company's ability to generate cash flow and, as a result, to plan for future capital and operational decisions. Management uses these non-GAAP financial measures in conjunction with related GAAP financial measures.

These non-GAAP financial measures have certain shortcomings. In particular, free cash flow does not represent the residual cash flow available for discretionary expenditures, since items such as debt repayments and dividends are not deducted in determining such measure. Operating cash flow has similar shortcomings as interest, income taxes, capital expenditures, debt repayments and dividends are not deducted in determining this measure. Management compensates for the shortcomings of these measures by utilizing them in conjunction with their comparable GAAP financial measures. The information in this press release should be read in conjunction with the financial statements and footnotes contained in our documents filed with the U.S. Securities and Exchange Commission.

Conference Call and Webcast

The Company will host a conference call today at 4:30 P.M. Eastern time. In connection with the conference call and as a convenience to investors, the Company furnished today on a Current Report on Form 8-K certain materials regarding fourth quarter 2012 results. The conference call will be webcast and may be accessed at:

http://investor.frontier.com/eventdetail.cfm?eventid=124338

A telephonic replay of the conference call will be available for one week beginning at 7:30 P.M. Eastern time, February 21, 2013 via dial-in at 888-203-1112 for U.S. and Canadian callers or, outside the U.S. and Canada, at 719-457-0820, passcode 1848514. A webcast replay of the call will be available at www.frontier.com/ir.

About Frontier Communications

Frontier Communications Corporation (NASDAQ: FTR) offers broadband, voice, satellite video, wireless Internet data access, data security solutions, bundled offerings and specialized bundles for residential customers, small businesses and home offices, and advanced business communications for medium and large businesses in 27 states. Frontier's approximately 14,700 employees are based entirely in the United States. More information is available at www.frontier.com and www.frontier.com/ir.

Forward-Looking Statements

This press release contains forward-looking statements that are made pursuant to the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. These statements are made on the basis of management's views and assumptions regarding future events and business performance. Words such as "believe," "anticipate," "expect" and similar expressions are intended to identify forward-looking statements. Forward-looking statements (including oral representations) involve risks and uncertainties that may cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. These risks and uncertainties are based on a number of factors, including but not limited to: the effects of greater than anticipated competition which could require us to develop new pricing, marketing strategies or new product or service offerings and the risk that we will not respond on a timely or profitable basis; reductions in the number of our voice customers that we cannot offset with increases in broadband subscribers and sales of other products and services; the effects of competition from cable, wireless and other wireline carriers; our ability to maintain relationships with customers, employees or suppliers; the effects of ongoing changes in the regulation of the communications industry as a result of federal and state legislation and regulation, or changes in the enforcement or interpretation of such legislation and regulation; the effects of any unfavorable outcome with respect to any current or future legal, governmental or regulatory proceedings, audits or disputes; the effects of changes in the availability of federal and state universal funding to us and our competitors; our ability to adjust successfully to changes in the communications industry and to implement strategies for growth; continued reductions in switched access revenues as a result of regulation, competition or technology substitutions; our ability to effectively manage service quality in our territories and meet mandated service quality metrics; our ability to successfully introduce new product offerings, including our ability to offer bundled service packages on terms that are both profitable to us and attractive to customers; the effects of changes in accounting policies or practices adopted voluntarily or as required by generally accepted accounting principles or regulations; our ability to effectively manage our operations, operating expenses and capital expenditures, and to repay, reduce or refinance our debt; the effects of changes in both general and local economic conditions on the markets that we serve, which can affect demand for our products and services, customer purchasing decisions, collectability of revenues and required levels of capital expenditures related to new construction of residences and businesses; the effects of technological changes and competition on our capital expenditures, product and service offerings and measurement of speeds and capacity, including the lack of assurance that our network improvements will be sufficient to meet or exceed the capabilities and quality of competing networks; the effects of increased medical, pension and postemployment expenses and related funding requirements; the effects of changes in income tax rates, tax laws, regulations or rulings, or federal or state tax assessments; our ability to successfully renegotiate union contracts in 2013 and thereafter; changes in pension plan assumptions and/or the value of our pension plan assets, which could require us to make increased contributions to the pension plan in 2013 and beyond; the effects of customer bankruptcies and home foreclosures, which could result in difficulty in collection of revenues and loss of customers; adverse changes in the credit markets or in the ratings given to our debt securities by nationally accredited ratings organizations, which could limit or restrict the availability, or increase the cost, of financing; our cash flow from operations, amount of capital expenditures, debt service requirements, cash paid for income taxes and liquidity may affect our payment of dividends on our common shares; the effects of state regulatory cash management practices that could limit our ability to transfer cash among our subsidiaries or dividend funds up to the parent company; and the effects of severe weather events such as hurricanes, tornadoes, ice storms or other natural or man-made disasters. These and other uncertainties related to our business are described in greater detail in our filings with the Securities and Exchange Commission, including our reports on Forms 10-K and 10-Q, and the foregoing information should be read in conjunction with these filings. We do not intend to update or revise these forward-looking statements to reflect the occurrence of future events or circumstances.

Frontier Communications Corporation
Consolidated Financial Data
		For the quarter ended												For the year ended
		December 31,				September 30,				December 31,				December 31,
(Amounts in thousands, except per share amounts)		2012				2012				2011				2012				2011
Income Statement Data
Revenue		$	1,232,553			$	1,252,469			$	1,283,152			$	5,011,853			$	5,243,043
Network access expenses			108,535				102,051				120,828				441,588				518,682
Other operating expenses (1)			570,711				572,348				548,595				2,234,553				2,278,419
Depreciation and amortization			304,044				298,416				341,025				1,266,807				1,403,175
Integration costs (2)			13,533				4,458				42,247				81,737				143,146
Total operating expenses			996,823				977,273				1,052,695				4,024,685				4,343,422
Operating income			235,730				275,196				230,457				987,168				899,621
Losses on early extinguishment of debt			(19,300	)			(245	)			-				(90,363	)			-
Investment and other income (loss), net			1,138				4,602				1,487				20,132				11,526
Interest expense			178,881				172,188				165,162				687,985				665,196
Income before income taxes			38,687				107,365				66,782				228,952				245,951
Income tax expense			9,488				35,739				21,534				75,638				88,343
Net income (2)			29,199				71,626				45,248				153,314				157,608
Less: Income attributable to the noncontrolling interest in a partnership			4,320				4,626				3,001				16,678				7,994
Net income attributable to common shareholders of Frontier		$	24,879			$	67,000			$	42,247			$	136,636			$	149,614
Weighted average shares outstanding			991,316				991,295				990,276				990,537				989,852
Basic net income per share attributable to common shareholders of Frontier (3)		$	0.02			$	0.07			$	0.04			$	0.14			$	0.15
Non-GAAP adjusted net income per share attributable to common shareholders of Frontier (3) (4)		$	0.06			$	0.07			$	0.07			$	0.26			$	0.25
Other Financial Data
Capital expenditures - Business operations		$	177,300			$	195,034			$	111,792			$	748,407			$	748,361
Capital expenditures - Integration activities			15,329				10,828				13,837				54,097				76,478
Operating cash flow, as adjusted (4)			574,368				581,281				616,198				2,395,846				2,485,567
Free cash flow (4)			221,984				215,256				358,762				975,267				1,121,475
Dividends paid			99,843				99,845				186,584				399,390				746,387
Dividend payout ratio (5)			45	%			46	%			52	%			41	%			67	%

(1)		Includes severance costs of $17.2 million, $6.8 million and $1.1 million for the quarters ended December 31, 2012, September 30, 2012 and December 31, 2011, respectively, and $32.0 million and $15.7 million for the years ended December 31, 2012 and 2011, respectively.
(2)		Reflects integration costs of $13.5 million ($9.1 million or $0.01 per share after tax), $4.5 million ($2.9 million after tax) and $42.2 million ($26.1 million or $0.03 per share after tax) for the quarters ended December 31, 2012, September 30, 2012 and December 31, 2011, respectively. Reflects integration costs of $81.7 million ($51.8 million or $0.05 per share after tax) and $143.1 million ($88.4 million or $0.09 per share after tax) for the years ended December 31, 2012 and 2011, respectively.
(3)		Calculated based on weighted average shares outstanding.
(4)		Reconciliations to the most comparable GAAP measures are presented in Schedules A, B and C at the end of these tables.
(5)		Represents dividends paid divided by free cash flow, as defined in Schedule A.

Frontier Communications Corporation
Consolidated Financial and Operating Data
		For the quarter ended												For the year ended
		December 31,				September 30,				December 31,				December 31,
(Amounts in thousands, except operating data)		2012				2012				2011				2012				2011
Selected Income Statement Data
Revenue:
Local and long distance services		$	542,538			$	556,353			$	592,860			$	2,230,890			$	2,451,311
Data and internet services			456,422				461,212				464,873				1,823,010				1,842,933
Other			92,393				94,929				78,377				381,536				329,658
Customer revenue			1,091,353				1,112,494				1,136,110				4,435,436				4,623,902
Switched access and subsidy			141,200				139,975				147,042				576,417				619,141
Total revenue		$	1,232,553			$	1,252,469			$	1,283,152			$	5,011,853			$	5,243,043
Other Financial and Operating Data
Revenue:
Business		$	574,451			$	581,097			$	591,966			$	2,317,212			$	2,353,375
Residential			516,902				531,397				544,144				2,118,224				2,270,527
Customer revenue			1,091,353				1,112,494				1,136,110				4,435,436				4,623,902
Switched access and subsidy			141,200				139,975				147,042				576,417				619,141
Total revenue		$	1,232,553			$	1,252,469			$	1,283,152			$	5,011,853			$	5,243,043
Customers			3,173,169				3,223,557				3,413,666				3,173,169				3,413,666
Average monthly total revenue
per customer		$	128.46			$	128.48			$	123.83			$	127.32			$	121.88
Average monthly customer revenue
per customer		$	113.74			$	114.12			$	109.64			$	112.68			$	107.50
Business customer metrics:
Customers			286,106				291,394				309,900				286,106				309,900
Revenue		$	574,451			$	581,097			$	591,966			$	2,317,212			$	2,353,375
Average monthly business revenue per customer		$	663.15			$	659.01			$	627.14			$	650.63			$	601.14
Residential customer metrics:
Customers			2,887,063				2,932,163				3,103,766				2,887,063				3,103,766
Revenue		$	516,902			$	531,397			$	544,144			$	2,118,224			$	2,270,527
Average monthly residential revenue per customer (1)		$	58.00			$	58.72			$	56.95			$	58.03			$	57.40
Customer monthly churn			1.62	%			1.64	%			1.54	%			1.62	%			1.69	%
Employees			14,659				15,250				15,388				14,659				15,388
Broadband subscribers			1,787,561				1,782,278				1,764,160				1,787,561				1,764,160
Video subscribers (2)			346,627				328,538				303,046				346,627				303,046
Switched access minutes of use (in millions)			4,523				4,481				4,482				18,292				18,894

(1)		Calculation excludes the Mohave Cellular Limited Partnership.
(2)		Video subscribers excludes the loss of 203,100 DirecTV subscribers in the third quarter of 2012 as Frontier no longer provides DirecTV as part of its bundled packages. Video subscribers excludes 224,500 DirecTV subscribers as of December 31, 2011.

Frontier Communications Corporation
Condensed Consolidated Balance Sheet Data
(Amounts in thousands)
		December 31, 2012				December 31, 2011
ASSETS
Current assets:
Cash and cash equivalents		$	1,326,532			$	326,094
Accounts receivable, net			533,704				585,157
Restricted cash			15,408				-
Other current assets			211,559				327,779
Total current assets			2,087,203				1,239,030
Restricted cash			27,252				144,680
Property, plant and equipment, net			7,504,896				7,547,523
Other assets - principally goodwill			8,114,280				8,517,086
Total assets		$	17,733,631			$	17,448,319
LIABILITIES AND EQUITY
Current liabilities:
Long-term debt due within one year		$	560,550			$	94,016
Accounts payable and other current liabilities			992,970				1,058,200
Total current liabilities			1,553,520				1,152,216
Deferred income taxes and other liabilities			3,678,893				3,602,577
Long-term debt			8,381,947				8,224,392
Equity			4,119,271				4,469,134
Total liabilities and equity		$	17,733,631			$	17,448,319

Frontier Communications Corporation
Consolidated Cash Flow Data
(Amounts in thousands)
		For the year ended December 31,
		2012				2011
Cash flows provided by (used in) operating activities:
Net income		$	153,314			$	157,608
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense			1,266,807				1,403,175
Stock based compensation expense			16,775				14,209
Pension/OPEB costs			28,087				23,897
Losses on early extinguishment of debt			90,363				-
Other non-cash adjustments			10,319				(28,036	)
Deferred income taxes			80,501				87,411
Change in accounts receivable			43,813				(72,600	)
Change in accounts payable and other liabilities			(148,906	)			(84,689	)
Change in other current assets			11,400				71,706
Net cash provided by operating activities			1,552,473				1,572,681
Cash flows provided from (used by) investing activities:
Capital expenditures - Business operations			(748,407	)			(748,361	)
Capital expenditures - Integration activities			(54,097	)			(76,478	)
Network expansion funded by Connect America Fund			(4,830	)			-
Grant funds received for network expansion from Connect America Fund			65,981				-
Cash transferred from escrow			102,020				43,012
Other assets purchased and distributions received, net			4,394				19,155
Net cash used by investing activities			(634,939	)			(762,672	)
Cash flows provided from (used by) financing activities:
Long-term debt borrowings			1,360,625				575,000
Financing costs paid			(27,852	)			(5,444	)
Long-term debt payments			(756,953	)			(552,394	)
Premium paid to retire debt			(72,290	)			-
Dividends paid			(399,390	)			(746,387	)
Repayment of customer advances for construction, distributions to noncontrolling interests and other			(21,236	)			(5,953	)
Net cash provided from (used by) financing activities			82,904				(735,178	)
Increase (decrease) in cash and cash equivalents			1,000,438				74,831
Cash and cash equivalents at January 1,			326,094				251,263
Cash and cash equivalents at December 31,		$	1,326,532			$	326,094
Cash paid (received) during the period for:
Interest		$	636,485			$	653,500
Income taxes (refunds)		$	4,715			$	(33,072	)
Non-cash investing and financing activities:
Capital lease obligations		$	26,596			$	-
Financing obligation for contribution of real property to pension plan		$	-			$	58,100
Reduction of pension obligation		$	-			$	(58,100	)
Increase (decrease) in capital expenditures due to changes in accounts payable		$	9,802			$	1,338

																		Schedule A
Frontier Communications Corporation
Reconciliation of Non-GAAP Financial Measures
		For the quarter ended												For the year ended
		December 31,				September 30,				December 31,				December 31,
(Amounts in thousands)		2012				2012				2011				2012				2011
Net Income to Free Cash Flow;
Net Cash Provided by Operating Activities
Net income		$	29,199			$	71,626			$	45,248			$	153,314			$	157,608
Add back:
Depreciation and amortization			304,044				298,416				341,025				1,266,807				1,403,175
Income tax expense			9,488				35,739				21,534				75,638				88,343
Integration costs			13,533				4,458				42,247				81,737				143,146
Pension/OPEB costs (non-cash) (1)			3,867				(3,633	)			1,382				28,087				23,897
Severance costs (2)			17,194				6,844				1,087				32,047				15,728
Stock based compensation			3,825				5,175				3,480				16,775				14,209
Subtract:
Cash paid (refunded) for income taxes			622				4,301				(16,825	)			4,715				(33,072	)
Losses on early extinguishment of debt			(19,300	)			(245	)			-				(90,363	)			-
Other income (loss), net			544				4,279				2,274				16,379				9,342
Capital expenditures - Business operations (3)			177,300				195,034				111,792				748,407				748,361
Free cash flow (2)			221,984				215,256				358,762				975,267				1,121,475
Add back:
Deferred income taxes			20,707				32,636				67,192				80,501				87,411
Non-cash (gains)/losses, net			10,971				196				(19,854	)			55,181				10,070
Other income (loss), net			544				4,279				2,274				16,379				9,342
Cash paid (refunded) for income taxes			622				4,301				(16,825	)			4,715				(33,072	)
Capital expenditures - Business operations (3)			177,300				195,034				111,792				748,407				748,361
Subtract:
Changes in current assets and liabilities			(7,967	)			627				133,584				93,693				85,583
Income tax expense			9,488				35,739				21,534				75,638				88,343
Integration costs			13,533				4,458				42,247				81,737				143,146
Pension/OPEB costs (non-cash) (1)			3,867				(3,633	)			1,382				28,087				23,897
Severance costs (2)			17,194				6,844				1,087				32,047				15,728
Stock based compensation			3,825				5,175				3,480				16,775				14,209
Net cash provided by operating activities		$	392,188			$	402,492			$	300,027			$	1,552,473			$	1,572,681

(1)		Reflects pension and other postretirement benefit (OPEB) expense, net of capitalized amounts, of $16.8 million, $17.1 million and $2.2 million for the quarters ended December 31, 2012, September 30, 2012 and December 31, 2011, respectively, less cash pension contributions and certain OPEB costs/payments of $13.0 million, $20.8 million and $0.8 million for the quarters ended December 31, 2012, September 30, 2012 and December 31, 2011, respectively. Reflects pension and OPEB expense, net of capitalized amounts, of $66.3 million and $48.1 million for the years ended December 31, 2012 and 2011, respectively, less cash pension contributions and certain OPEB costs/payments of $38.2 million and $24.2 million for the years ended December 31, 2012 and 2011, respectively.
(2)		The definition of free cash flow has been revised as of January 1, 2012 to add back severance costs, with all prior periods conformed to the current calculation.
(3)		Excludes capital expenditures for integration activities.

																																		Schedule B
Frontier Communications Corporation
Reconciliation of Non-GAAP Financial Measures
		For the quarter ended December 31, 2012																					For the quarter ended December 31, 2011
(Amounts in thousands)
Operating Cash Flow and Operating Cash Flow Margin										Non-cash																					Non-cash
		As				Integration				Pension/OPEB				Severance				As					As				Integration				Pension/OPEB			Severance				As
		Reported				Costs				Costs (1)				Costs				Adjusted					Reported				Costs				Costs (1)			Costs				Adjusted
Operating Income		$	235,730			$	13,533			$	3,867			$	17,194			$	270,324				$	230,457			$	42,247			$	1,382		$	1,087			$	275,173
Add back:
Depreciation and amortization			304,044				-				-				-				304,044					341,025				-				-			-				341,025
Operating cash flow		$	539,774			$	13,533			$	3,867			$	17,194			$	574,368				$	571,482			$	42,247			$	1,382		$	1,087			$	616,198
Revenue		$	1,232,553															$	1,232,553				$	1,283,152														$	1,283,152
Operating income margin
(Operating income divided by revenue)			19.1	%															21.9	%				18.0	%														21.4	%
Operating cash flow margin
(Operating cash flow divided by revenue)			43.8	%															46.6	%				44.5	%														48.0	%
		For the quarter ended September 30, 2012
Operating Cash Flow and Operating Cash Flow Margin										Non-cash
		As				Integration				Pension/OPEB				Severance				As
		Reported				Costs				Costs (1)				Costs				Adjusted
Operating Income		$	275,196			$	4,458			$	(3,633	)		$	6,844			$	282,865
Add back:
Depreciation and amortization			298,416				-				-				-				298,416
Operating cash flow		$	573,612			$	4,458			$	(3,633	)		$	6,844			$	581,281
Revenue		$	1,252,469															$	1,252,469
Operating income margin
(Operating income divided by revenue)			22.0	%															22.6	%
Operating cash flow margin
(Operating cash flow divided by revenue)			45.8	%															46.4	%

(1)		Reflects pension and other postretirement benefit (OPEB) expense, net of capitalized amounts, of $16.8 million, $17.1 million and $2.2 million for the quarters ended December 31, 2012, September 30, 2012 and December 31, 2011, respectively, less cash pension contributions and certain OPEB costs/payments of $13.0 million, $20.8 million and $0.8 million for the quarters ended December 31, 2012, September 30, 2012 and December 31, 2011, respectively.

																																			Schedule B
																																			(continued)
Frontier Communications Corporation
Reconciliation of Non-GAAP Financial Measures
		For the year ended December 31, 2012																					For the year ended December 31, 2011
(Amounts in thousands)
Operating Cash Flow and Operating Cash Flow Margin										Non-cash																					Non-cash
		As				Integration				Pension/OPEB				Severance				As					As				Integration				Pension/OPEB				Severance				As
		Reported				Costs				Costs (1)				Costs				Adjusted					Reported				Costs				Costs (1)				Costs				Adjusted
Operating Income		$	987,168			$	81,737			$	28,087			$	32,047			$	1,129,039				$	899,621			$	143,146			$	23,897			$	15,728			$	1,082,392
Add back:
Depreciation and amortization			1,266,807				-				-				-				1,266,807					1,403,175				-				-				-				1,403,175
Operating cash flow		$	2,253,975			$	81,737			$	28,087			$	32,047			$	2,395,846				$	2,302,796			$	143,146			$	23,897			$	15,728			$	2,485,567
Revenue		$	5,011,853															$	5,011,853				$	5,243,043															$	5,243,043
Operating income margin
(Operating income divided by revenue)			19.7	%															22.5	%				17.2	%															20.6	%
Operating cash flow margin
(Operating cash flow divided by revenue)			45.0	%															47.8	%				43.9	%															47.4	%

(1)		Reflects pension and other postretirement benefit (OPEB) expense, net of capitalized amounts, of $66.3 million and $48.1 million for the years ended December 31, 2012 and 2011, respectively, less cash pension contributions and certain OPEB costs/payments of $38.2 million and $24.2 million for the years ended December 31, 2012 and 2011, respectively.

																		Schedule C
Frontier Communications Corporation
Reconciliation of Non-GAAP Financial Measures
(Amounts in thousands, except per share amounts)		For the quarter ended
		December 31, 2012								September 30, 2012								December 31, 2011
Net income attributable to common						Earnings								Earnings								Earnings
shareholders of Frontier		Net Income				Per Share				Net Income				Per Share				Net Income				Per Share
GAAP, as reported		$	24,879			$	0.02			$	67,000			$	0.07			$	42,247			$	0.04
Losses on early extinguishment of debt			12,120				0.01				154				-				-				-
Integration costs			9,067				0.01				2,916				-				26,088				0.03
Severance costs			11,520				0.01				4,476				-				671				-
Discrete tax items (1)			361				-				(5,667	)			(0.01	)			(2,397	)			-
Non-GAAP, as adjusted (2)		$	57,947			$	0.06			$	68,879			$	0.07			$	66,609			$	0.07
		For the year ended
		December 31, 2012								December 31, 2011
Net income attributable to common						Earnings								Earnings
shareholders of Frontier		Net Income				Per Share				Net Income				Per Share
GAAP, as reported		$	136,636			$	0.14			$	149,614			$	0.15
Losses on early extinguishment of debt			56,748				0.06				-				-
Integration costs			51,789				0.05				88,393				0.09
Severance costs			20,965				0.02				9,712				0.01
Gain on investment in Adelphia			(6,191	)			(0.01	)			-				-
Discrete tax items (1)			(5,306	)			(0.01	)			(4,546	)			-
Non-GAAP, as adjusted (2)		$	254,641			$	0.26			$	243,173			$	0.25

⁽¹⁾ Includes the reversal of uncertain tax positions and changes in certain deferred tax balances.

⁽²⁾ Non-GAAP, as adjusted may not sum due to rounding.

Frontier Communications Corporation
INVESTORS:
Robert W. Starr, 203-614-5708
Senior Vice President and Treasurer
robert.starr@FTR.com
or
MEDIA:
Brigid Smith, 203-614-5042
AVP Corporate Communications
brigid.smith@FTR.com

Source: Frontier Communications Corporation

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