<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 26, 1999
FRONTIER CORPORATION
(Exact name of registrant as specified in its charter)
New York 1-4166 16-0613330
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
180 South Clinton Avenue, Rochester, New York 14646
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (716) 777-1000
Item 5 Other Events
- ------ ------------
Frontier Corporation today reported its fourth
quarter and year-end 1998 results. Frontier
Corporation also announced an adjustment to its
dividend policy to allow the Company to capitalize on
growth opportunities. The annual dividend will be
reduced to $0.20 per share.
As permitted by General Instruction F to Form 8-K, the
Registrant incorporates by reference the information contained in
the press release which is filed as an Exhibit to this Report on
Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf of the undersigned hereunto duly
authorized.
Frontier Corporation
(Registrant)
/s/ Barbara J. LaVerdi
Dated: January 26, 1999 By: _____________________________
Barbara J. LaVerdi
Assistant Secretary
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------- ------------------
99 Press release announcing Filed herewith
fourth quarter and year end
results and dividend policy
change
Frontier Press Release
Frontier Corporation
180 South Clinton Avenue
Rochester, NY 14646
Date: January 26, 1999
Contact: Kirsten J. Sullivan, 716-777-6179, investors
Michele D. Sadwick, 716-777-6021, media
Summary: Frontier Reports 50% EPS growth in the fourth quarter;
26% EPS growth for the year
Board Approves Bold Dividend Restructuring to Capitalize
on Growth Opportunities
ROCHESTER, NEW YORK - January 26, 1999 -
Frontier Corporation (NYSE:FRO) today reported strong fourth
quarter and year-end 1998 results that affirm the company is
successfully repositioned as a leading next-generation carrier ready
to fully participate in the exploding data and Internet markets.
The company's fourth quarter normalized earnings per share
increased 50 percent to $0.27, and year-end 1998 normalized earnings
increased 26 percent to $1.02, exceeding published First Call analyst
expectations. Net income increased 54 percent in the quarter to
reach $47.1 million, and 28.5 percent to $177.4 million for the year.
Revenue growth was up more than 9 percent to $655 million for the
fourth quarter, and grew by 9 percent to $2.6 billion for the fiscal
year.
Frontier's focus as a growth-oriented company is further
evidenced by the historic step its Board of Directors took yesterday
in approving an adjustment to its annual common stock dividend. That
dividend will be reduced from $0.89 to $0.20 per share annually.
This change in dividend policy is expected to provide Frontier with
more than $118 million in cash savings annually.
"In this dynamic and ultra-competitive industry, it is crucial
that we have the financial flexibility to support our growth
initiatives and pursue the strategic investments that will enhance
our long-term value," said Joseph P. Clayton, Frontier President
and Chief Executive Officer. "Building on the momentum of a solid
year of earnings growth, the dividend restructuring is a strategic
move that clearly demonstrates we are serious about propelling
Frontier to an even higher level of performance."
Dividend Restructuring
The reduction of the annual common stock dividend will be
effective with the payment of the common stock cash dividend
currently expected to be declared in March and paid on May 1, 1999 to
shareholders of record April 15, 1999. The reduction has no effect
on the common stock dividend payable February 1, 1999 to shareholders
of record on January 15, 1999, nor on any outstanding issues of
Frontier Corporation preferred stock. Additionally this action will
not change in any way the relationship between Frontier Corporation
and its regulated carrier subsidiaries.
Based on yesterday's closing stock price of $36.125 per share,
Frontier's dividend yield would be 0.55 percent, placing it more in
line with growth-oriented integrated telecommunication services
companies.
"By having a dividend level more in line with other competitive
telecommunications companies, we believe our financial position is
strengthened, and we broaden our ability to make substantial
investments in our fast-growing integrated services businesses," added
Clayton. "The lower dividend pay-out will give Frontier the cash we
need to continue growing, but with a sharper focus. We will now deploy
our resources to their best advantage in those areas that will
accelerate the growth we have already started to see in our emerging
data and Internet businesses."
CONSOLIDATED FINANCIAL RESULTS
Consolidated Results 4Q1998 4Q1997 Y-o-Y 3Q1998 Sequential
--------------------------------------------------------------
Revenue $655.0 $600.6 9.1% $658.2 (0.5%)
Operating Income $87.4 $62.6 39.6% $81.1 7.7%
Normalized Net
Income $47.1 $30.6 53.9% $45.4 3.7%
Diluted EPS
(Normalized) $0.27 $0.18 50.0% $0.26 3.8%
($ in millions)
Consolidated Highlights
- -- First to deploy Asynchronous Transfer Mode (ATM)
backbone at OC-48 rates direct to the optical layer, making
it the fastest ATM network in the industry.
- -- First to deploy Pirelli's hyper-dense wavelength
division multiplexing (HDWDM) equipment, making Frontier's
network scalable to terabit speeds.
- -- Continued building two new Mega Media Distribution
Centers in Sunnyvale, CA and New York City.
- -- Completed nearly 100 percent migration of the revenue
base from other billing platforms onto Frontier's Unified
Billing System.
- -- Decreased employee initiated turn-over by more than 500
basis points as compared to 1997.
- -- Continued progress on the original network build which
is now 86 percent lit. The total 20,000 mile Optronics
system is now 57 percent lit.
- -- Announced a network capacity swap with Enron
Communications, creating two additional rings and multi-
window redundant routes in the western half of the United
States. A map denoting the progress of the Optronics
network build is available on the company's web site at
www.frontiercorp.com
INSERTED HERE IS A GRAPHIC OF THE UNITED STATES SHOWING
COMPLETED SECTIONS OF THE OPTRONICS NETWORK BUILD AND PORTIONS
IN PROGRESS.
INTEGRATED SERVICES
Integrated Services 4Q1998 4Q1997 Y-o-Y 3Q1998 Sequential
------------------------------------------------------------------
Revenue $473.0 $420.2 12.5% $476.0 (0.6%)
EBITDA $60.0 $28.5 110.2% $52.7 13.8%
EBITDA Margin 12.7% 6.8% 590bp 11.1% 160bp
Operating Income $28.3 $2.9 879.7% $25.4 11.6%
Operating Income Margin 6.0% 0.7% 530bp 5.3% 70bp
($ in millions, bp = basis points)
The Integrated Services (IS) segment includes the commercial,
consumer and carrier businesses for all data, competitive local
(CLEC), long distance, audio/video conferencing and other value-added
services.
Year-over-year comparisons are affected by the company's strategy
to exit from certain low-profit product lines, including prepaid
calling cards and selected consumer products:
Integrated Services
Revenue 4Q1998 4Q1997 Y-o-Y 3Q1998 Sequential
- ---------------------------------------------------------------
Reported Revenue $473.0 $420.2 12.5% $476.0 (0.6%)
Less businesses
the company is
exiting ($22.2) ($49.2) (54.9%) ($27.7) (19.9%)
Revenue from
continuing
operations $450.8 $371.0 21.5% $448.3 0.6%
($ in millions)
The 13 percent revenue growth in Frontier's integrated services
segment this quarter was driven by three main areas of focus for the
company:
- -- 320 percent year-over-year growth in data services
revenue to reach $31 million in the fourth quarter.
- -- 102 percent increase in CLEC revenue over the same
quarter last year to over $47 million.
- -- 57 percent year-over-year increase in carrier services
revenue to $177 million.
"We have made significant progress in refocusing the company to
fuel our growth businesses," said Clayton. "Going forward, our
growth will be driven by the network we're building, the liquid
bandwidth we're creating, and the web-enable everything philosophy
we're embracing."
Integrated Services Highlights
Data Services Business
- -- Grew frame relay revenue by over 50 percent in the
quarter compared to third quarter 1998.
- -- Increased digital distribution revenue in 1998 by more
than 218 percent over 1997.
- -- Added new digital distribution customers:
Washingtonpost.Newsweek Interactive in the U.S., and
Network Solutions, Inc., in London, UK.
Competitive Local Exchange (CLEC) Business
- -- Increased CLEC lines to nearly 208,000 lines; more than
doubling year-end 1997's number.
- -- Now serve 32 states plus Washington D. C. for local
resale and offer facilities-based local service in 13 top
business markets, cumulatively reaching approximately 70
percent of the U.S. business population.
Carrier Services
- -- Grew carrier business 57 percent over the fourth
quarter of 1997.
- -- Signed carrier agreements during the quarter with
companies such as PaeTec, IDT, WorldPort, and extended
partnership with Level 3.
- -- Backlog of carrier contracts reached nearly $1 billion.
General Business
- -- Controlled customer attrition in the commercial segment
during the quarter to 2 percent.
- -- Announced partnership with Juris to provide law firms
with a fully integrated expense tracking solution.
LOCAL COMMUNICATIONS SERVICES
Local Operations 4Q1998 4Q1997 Y-o-Y 3Q1998 Sequential
----------------------------------------------------------
Revenue $177.3 $170.0 4.3% $176.4 0.5%
EBITDA $93.8 $91.1 2.9% $88.3 6.2%
EBITDA Margin 52.9% 53.6% (70bp) 50.0% 290 bp
Operating Income $65.4 $63.0 3.7% $60.3 8.4%
Operating Income 36.9% 37.1% (20bp) 34.2% 270bp
Margin
($ in millions, bp = basis points)
The company increased spending for service quality improvements
in Frontier's local telephone company in Rochester, N.Y. In the
third quarter, the New York State Public Service Commission agreed to
Frontier's aggressive plan to re-establish the company's historic
levels of service. The company met its overall service level target
in the fourth quarter, for the first time in 1998.
Combined, Frontier's 34 local telephone properties continue to
produce industry-leading operating results. "This area of the
business continues to outperform the industry, and provides an
excellent source of funding for a number of our growth initiatives,"
added Clayton.
Local Highlights
- -- Increased total access lines by 3.5 percent over last
year to 1,033,900.
- -- Experienced a 3.4 percent increase in access minutes
over fourth quarter 1997.
OTHER
Equity earnings from the company's unconsolidated wireless
interests, including Frontier Cellular, the 50/50 joint venture of
Frontier and Bell Atlantic, currently managed by Frontier, were $4.9
million in the fourth quarter, a 21 percent increase over the $4.0
million reported in the year-ago quarter. Customers increased to
more than 387,600.
Frontier's total capital expenditures for the year were $696
million. In the fourth quarter of 1998 capital expenditures were
$329 million, with the company's Optronics network accounting for
nearly $148 million of the total.
About Frontier
Frontier Corporation is one of the leading providers of
integrated communications services -- including Internet, IP and data
applications, long distance, local telephone and wireless -- to
business customers nationwide. Frontier's self-healing, optical
network provides customers with faster transmission speeds, greater
bandwidth capacity and unrivaled reliability. For more information,
visit the Frontier web site at www.frontiercorp.com
The statements made in this press release, other than historical
financial results, may be forward-looking in nature. Actual results
may differ materially from those projected in forward-looking
statements. We believe that our primary risk factors include, but
are not limited to: changes in the overall economy; technology; the
number and size of competitors in our markets; the increasing
competitiveness of the market segments in which we participate, law
and regulatory policy; and the mix of products and services offered
in our target markets. Additional information concerning these and
other potential important factors can be found within our SEC
Filings. You should evaluate any statements in light of these
important factors.
You can receive a faxed copy of any Frontier Corporation
press release dating back to January 1998, free of charge,
24 hours a day by calling 1-800-448-8533. An automated
system will provide you with instructions.
<PAGE>
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<TABLE>
FRONTIER CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
December 31, Change
In thousands of dollars,
except per share data 1998 1997 Amount Percent
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue
Integrated Services $472,927 $420,245 $ 52,682 12.5%
Local Communications 177,296 169,989 7,307 4.3%
Corporate Operations and Other 4,813 10,362 (5,549) (53.6%)
- ---------------------------------------------------------------------
Total Revenue 655,036 600,596 54,440 9.1%
Operating Expenses 506,920 483,316 23,604 4.9%
- ---------------------------------------------------------------------
EBITDA before other charges 148,116 117,280 30,836 26.3%
EBITDA % before other charges 22.6% 19.5% 310 bp -
Depreciation and Amortization 60,724 54,663 6,061 11.1%
- ---------------------------------------------------------------------
Total Costs and Expenses 567,644 537,979 29,665 5.5%
Operating Income before
other charges 87,392 62,617 24,775 39.6%
Operating income % before
other charges 13.3% 10.4% 290 bp -
Other charges - (86,784) (86,784) (100.0%)
- ---------------------------------------------------------------------
Operating Income (Loss) 87,392 (24,167) 111,559 -
Interest expense 15,802 13,139 2,663 20.3%
Other income:
Gain on sale of assets 5,209 - 5,209 100.0%
Equity earnings from
unconsolidated wireless
interests 4,908 4,070 838 20.6%
Interest income 1,631 1,291 340 26.3%
Other (expense) income (203) 1,545 (1,748) (113.1%)
- ---------------------------------------------------------------------
Income (Loss) Before Taxes 83,135 (30,400) 113,535 -
Income tax expense 32,926 (6,318) 39,244 -
- ---------------------------------------------------------------------
Consolidated Net Income (Loss) 50,209 (24,082) 74,291 -
Dividends on preferred stock 251 255 (4) (1.6%)
- ---------------------------------------------------------------------
Basic Income (Loss) Applicable
to Common Stock $ 49,958 $(24,337) 74,295 -
- ---------------------------------------------------------------------
Basic Earnings (Loss) Per
Common Share $ 0.29 $ (0.14) $ 0.43 -
- ---------------------------------------------------------------------
Diluted Earnings Adjustment 90 - 90 100.0%
- ---------------------------------------------------------------------
Diluted Income (Loss) Applicable
to Common Stock $ 50,048 $(24,337) 74,385 -
- ---------------------------------------------------------------------
Diluted Earnings (Loss) Per
Common Share $ 0.29 $ (0.14) $ 0.43 -
- ---------------------------------------------------------------------
Average Shares Outstanding
- Basic 170,568 169,877 691 0.4%
Average Shares Outstanding
- Diluted 174,168 169,877 4,291 2.5%
Dividends declared on
common stock $ 38,175 $ 36,582 1,593 4.4%
- ---------------------------------------------------------------------
</TABLE>
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<TABLE>
FRONTIER CORPORATION
BUSINESS SEGMENT INFORMATION
(Unaudited)
Three Months Ended
December 31, Change
In thousands of dollars 1998 1997 Amount Percent
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Integrated Services:
Revenue
Commercial $ 242,836 $ 228,475 $ 14,361 6.3%
Consumer 53,128 72,688 (19,560) (26.9%)
Carrier 176,963 112,706 64,257 57.0%
Exited business
- Prepaid -- 6,376 (6,376) (100.0%)
- ---------------------------------------------------------------------
Total 472,927 420,245 52,682 12.5%
Cost of Access 298,712 276,498 22,214 8.0%
- ---------------------------------------------------------------------
Gross Margin 174,215 143,747 30,468 21.2%
Gross Margin % 36.8% 34.2% 260 bp --
Selling, General and
Administrative Expense 114,234 115,214 (980) (0.9%)
- ---------------------------------------------------------------------
EBITDA before
other charges 59,981 28,533 31,448 110.2%
EBITDA % before
other charges 12.7% 6.8% 590 bp --
Depreciation and
Amortization 31,648 25,641 6,007 23.4%
- ---------------------------------------------------------------------
Operating Income before
other charges 28,333 2,892 25,441 --
Operating Income % before
other charges 6.0% 0.7% 530 bp --
Other Charges -- (79,256) (79,256) (100.0%)
- ---------------------------------------------------------------------
Operating Income (Loss) $ 28,333 $ (76,364) $104,697 137.1%
Capital Expenditures $ 242,711 $ 160,008 $ 82,703 51.7%
Total Assets $ 1,740,320 $ 1,327,651 $412,669 31.1%
- ---------------------------------------------------------------------
Local Communications Services:
Revenue $ 177,296 $ 169,989 $ 7,307 4.3%
Costs and Expenses 83,504 78,880 4,624 5.9%
- ---------------------------------------------------------------------
EBITDA before
other charges 93,792 91,109 2,683 2.9%
EBITDA % before
other charges 52.9% 53.6% (70) bp --
Depreciation and
Amortization 28,427 28,100 327 1.2%
- ---------------------------------------------------------------------
Operating Income before
other charges 65,365 63,009 2,356 3.7%
Operating Income %
before other charges 36.9% 37.1% (20) bp --
Other Charges -- (4,174) (4,174) (100.0%)
- ---------------------------------------------------------------------
Operating Income $ 65,365 $ 58,835 $ 6,530 11.1%
Capital Expenditures $ 56,919 $ 39,403 $ 17,516 44.5%
Total Assets $1,033,655 $ 931,438 $ 102,217 11.0%
- ---------------------------------------------------------------------
Corporate Operations and Other:
Revenue $ 4,813 $ 10,362 $ (5,549) (53.6%)
Costs and Expenses 10,470 12,724 (2,254) (17.7%)
- ---------------------------------------------------------------------
EBITDA before
other charges (5,657) (2,362) (3,295) (139.5%)
EBITDA % before
other charges (117.5%) (22.8%)(9,470) bp --
Depreciation and
Amortization 649 922 (273) (29.6%)
- ---------------------------------------------------------------------
Operating Loss before
other charges (6,306) (3,284) 3,022 92.0%
Operating Loss % before
other charges (131.0%) (31.7%) 9,930 bp --
Other Charges -- (3,354) (3,354) (100.0%)
- ---------------------------------------------------------------------
Operating Loss $ (6,306) $ (6,638) $ (332) (5.0%)
Capital Expenditures $ 28,926 $ 9,229 $ 19,697 --
Total Assets $ 284,768 $ 228,831 $ 55,937 24.4%
- ---------------------------------------------------------------------
Consolidated:
Revenue $ 655,036 $ 600,596 $ 54,440 9.1%
Costs and Expenses 506,920 483,316 23,604 4.9%
- ---------------------------------------------------------------------
EBITDA before
other charges 148,116 117,280 30,836 26.3%
EBITDA % before
other charges 22.6% 19.5% 310 bp --
Depreciation and
Amortization 60,724 54,663 6,061 11.1%
- ---------------------------------------------------------------------
Operating Income before
other charges 87,392 62,617 24,775 39.6%
Operating Income %
before other charges 13.3% 10.4% 290 bp --
Other Charges -- (86,784) (86,784) (100.0%)
- ---------------------------------------------------------------------
Operating Income (Loss) $ 87,392 $ (24,167) $111,559 --
Capital Expenditures $ 328,556 $ 208,640 $119,916 57.5%
Total Assets $3,058,743 $2,487,920 $570,823 22.9%
- ---------------------------------------------------------------------
</TABLE>
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<TABLE>
FRONTIER CORPORATION
BALANCE SHEET
December 31, December 31, Change
In thousands of dollars 1998 1997 Amount Percent
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Cash and cash equivalents $ 85,143 $ 26,302 $ 58,841 -
Accounts receivable, net 422,724 380,324 42,400 11.1%
Materials and supplies 9,924 12,312 (2,388)(19.4%)
Deferred income taxes 13,320 33,948 (20,628)(60.8%)
Prepayments and other 35,563 37,419 (1,856) (5.0%)
- ---------------------------------------------------------------------
Total Current Assets 566,674 490,305 76,369 15.6%
- ---------------------------------------------------------------------
Property, plant and
equipment 3,205,451 2,440,070 765,381 31.4%
Accumulated depreciation 1,527,892 1,393,186 134,706 9.7%
- ---------------------------------------------------------------------
Property, plant and
equipment, net 1,677,559 1,046,884 630,675 60.2%
- ---------------------------------------------------------------------
Goodwill and customer base,
net 484,015 517,754 (33,739) (6.5%)
Deferred and other assets 330,495 432,977 (102,482)(23.7%)
- ---------------------------------------------------------------------
Total Assets $ 3,058,743 $ 2,487,920 $ 570,823 22.9%
- ---------------------------------------------------------------------
Liabilities and
Shareholders' Equity
Accounts payable $ 449,041 $ 343,606 $ 105,435 30.7%
Dividends payable 38,508 36,798 1,710 4.6%
Debt due within one year 9,466 6,443 3,023 46.9%
Taxes accrued 26,128 16,023 10,105 63.1%
Other liabilities 44,554 90,108 (45,554)(50.6%)
- ---------------------------------------------------------------------
Total Current Liabilities 567,697 492,978 74,719 15.2%
Long-term debt 1,350,821 934,681 416,140 44.5%
Deferred income taxes 40,046 10,927 29,119 -
Deferred employee
benefits obligation 81,925 74,965 6,960 9.3%
Shareholders' equity 1,018,254 974,369 43,885 4.5%
- ---------------------------------------------------------------------
Total Liabilities and
Shareholders' Equity $ 3,058,743 $ 2,487,920 $ 570,823 22.9%
- ---------------------------------------------------------------------
</TABLE>
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<TABLE>
FRONTIER CORPORATION
CONSOLIDATED QUARTERLY STATEMENTS OF INCOME
(Unaudited)
In thousands of dollars,
except per share data 4Q98 3Q98 2Q98 1Q98
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue
Integrated Services $472,927 $475,983 $464,664 $449,546
Local Communications 177,296 176,436 175,105 173,098
Corporate Operations and Other 4,813 5,789 8,547 9,354
- ---------------------------------------------------------------------
Total Revenue 655,036 658,208 648,316 631,998
Operating Expenses 506,920 521,182 513,510 502,216
- ---------------------------------------------------------------------
EBITDA before other charges 148,116 137,026 134,806 129,782
EBITDA % before other charges 22.6% 20.8% 20.8% 20.5%
Depreciation and Amortization 60,724 55,871 53,971 55,240
- ---------------------------------------------------------------------
Total Costs and Expenses 567,644 577,053 567,481 557,456
Operating Income before other
charges 87,392 81,155 80,835 74,542
Operating Income % before
other charges. 13.3% 12.3% 12.5% 11.8%
Other Charges - - - (6,528)
- ---------------------------------------------------------------------
Operating Income (Loss) 87,392 81,155 80,835 68,014
Interest expense 15,802 13,527 12,558 13,431
Other income:
Gain on sale of assets 5,209 618 14,551 -
Equity earnings from
unconsolidated wireless
interests 4,908 5,167 4,178 2,458
Interest income 1,631 1,064 1,191 1,198
Other (expense) income (203) 1,161 1,002 892
- ---------------------------------------------------------------------
Income (Loss) Before Taxes
and Cumulative Effect of
Change in Accounting Principle 83,135 75,638 89,199 59,131
Income tax expense 32,926 29,881 41,536 25,217
- ---------------------------------------------------------------------
Income (Loss) Before Cumulative
Effect of Change in Accounting
Principle 50,209 45,757 47,663 33,914
Cumulative Effect of Change in
Accounting Principle - - 1,755 -
- ---------------------------------------------------------------------
Consolidated Net Income (Loss) 50,209 45,757 45,908 33,914
Dividends on preferred stock 251 251 252 251
- ---------------------------------------------------------------------
Basic Income (Loss) Applicable
to Common Stock $ 49,958 $ 45,506 $ 45,656 $ 33,663
- ---------------------------------------------------------------------
Basic Earnings (Loss) Per
Common Share $ 0.29 $ 0.27 $ 0.27 $ 0.20
- ---------------------------------------------------------------------
Diluted Earnings Adjustment 90 90 90 90
- ---------------------------------------------------------------------
Diluted Income (Loss)
Applicable to Common Stock $ 50,048 $ 45,596 $ 45,746 $ 33,753
- ---------------------------------------------------------------------
Diluted Earnings (Loss) Per
Common Share $ 0.29 $ 0.26 $ 0.26 $ 0.20
- ---------------------------------------------------------------------
Average Shares Outstanding
- Basic 170,568 170,842 170,390 170,071
Average Shares Outstanding
- Diluted 174,168 174,696 174,093 172,804
Dividends declared on common
stock $ 38,175 $ 38,177 $ 38,191 $ 38,018
- ---------------------------------------------------------------------
</TABLE>
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<TABLE>
FRONTIER CORPORATION
CONSOLIDATED QUARTERLY STATEMENTS OF INCOME
(Unaudited)
In thousands of dollars,
except per share data 4Q97 3Q97 2Q97 1Q97
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue
Integrated Services $420,245 $428,705 $412,251 $405,299
Local Communications 169,989 166,772 166,987 163,330
Corporate Operations and Other 10,362 11,044 10,878 8,947
- ---------------------------------------------------------------------
Total Revenue 600,596 606,521 590,116 577,576
Operating Expenses 483,316 485,457 465,506 458,456
- ---------------------------------------------------------------------
EBITDA before other charges 117,280 121,064 124,610 119,120
EBITDA % before other charges 19.5% 20.0% 21.1% 20.6%
Depreciation and Amortization 54,663 56,193 50,590 51,086
- ---------------------------------------------------------------------
Total Costs and Expenses 537,979 541,650 516,096 509,542
Operating Income before
other charges 62,617 64,871 74,020 68,034
Operating Income % before
other charges. 10.4% 10.7% 12.5% 11.8%
Other Charges (86,784) - - (96,600)
- ---------------------------------------------------------------------
Operating Income (Loss) (24,167) 64,871 74,020 (28,566)
Interest expense 13,139 12,710 11,772 10,618
Other income:
Gain on sale of assets - - - 18,765
Equity earnings from
unconsolidated wireless
interests 4,070 3,676 2,783 1,490
Interest income 1,291 859 775 734
Other (expense) income 1,545 1,466 529 87
- ---------------------------------------------------------------------
Income (Loss) Before Taxes and
Cumulative Effect of Change in
Accounting Principle (30,400) 58,162 66,335 (18,108)
Income tax expense (6,318) 25,711 27,001 (2,206)
- ---------------------------------------------------------------------
Income (Loss) Before Cumulative
Effect of Change in Accounting
Principle (24,082) 32,451 39,334 (15,902)
Cumulative Effect of Change
in Accounting Principle - - - -
- ---------------------------------------------------------------------
Consolidated Net Income (Loss) (24,082) 32,451 39,334 (15,902)
Dividends on preferred stock 255 253 257 254
- ---------------------------------------------------------------------
Basic Income (Loss) Applicable
to Common Stock $(24,337) $ 32,198 $ 39,077 $(16,156)
- ---------------------------------------------------------------------
Basic Earnings (Loss) Per
Common Share $ (0.14) $ 0.19 $ 0.23 $ (0.10)
- ---------------------------------------------------------------------
Diluted Earnings Adjustment - 90 90 -
- ---------------------------------------------------------------------
Diluted Income (Loss)
Applicable to Common Stock $(24,337) $ 32,288 $ 39,167 $(16,156)
- ---------------------------------------------------------------------
Diluted Earnings (Loss) Per
Common Share $ (0.14) $ 0.19 $ 0.23 $ (0.10)
- ---------------------------------------------------------------------
Average Shares Outstanding
- Basic 169,877 169,179 168,461 167,006
Average Shares Outstanding
- Diluted 169,877 170,206 169,241 167,006
Dividends declared on common
stock $ 36,582 $ 35,561 $ 35,656 $ 35,653
- ---------------------------------------------------------------------
</TABLE>
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<TABLE>
FRONTIER CORPORATION
QUARTERLY BUSINESS SEGMENT INFORMATION
(Unaudited)
In thousands of dollars 4Q98 3Q98 2Q98 1Q98
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Integrated Services:
Revenue
Commercial $242,836 $248,828 $248,074 $242,239
Consumer 53,128 56,443 61,554 68,657
Carrier 176,963 170,712 155,036 138,650
Exited business-Prepaid - - - -
- ---------------------------------------------------------------------
Total 472,927 475,983 464,664 449,546
Cost of Access 298,712 305,232 301,029 286,787
- ---------------------------------------------------------------------
Gross Margin 174,215 170,751 163,635 162,759
Gross Margin % 36.8% 35.9% 35.2% 36.2%
Selling, General and
Administrative Expense 114,234 118,022 118,738 120,631
- ---------------------------------------------------------------------
EBITDA before other charges 59,981 52,729 44,897 42,128
EBITDA % before other charges 12.7% 11.1% 9.7% 9.4%
Depreciation and Amortization 31,648 27,338 25,176 25,935
- ---------------------------------------------------------------------
Operating Income before other
charges 28,333 25,391 19,721 16,193
Operating Income % before
other charges 6.0% 5.3% 4.2% 3.6%
Other Charges - - - (6,528)
- ---------------------------------------------------------------------
Operating Income (Loss) $ 28,333 $ 25,391 $ 19,721 $ 9,665
Capital Expenditures $242,711 $103,768 $ 85,639 $ 55,285
Total Assets $1,740,320 $1,566,865 $1,488,341 $1,393,897
- ---------------------------------------------------------------------
Local Communications Services:
Revenue $ 177,296 $ 176,436 $ 175,105 $ 173,098
Costs and Expenses 83,504 88,150 81,826 81,162
- ---------------------------------------------------------------------
EBITDA before other charges 93,792 88,286 93,279 91,936
EBITDA % before other charges 52.9% 50.0% 53.3% 53.1%
Depreciation and Amortization 28,427 27,987 28,167 28,344
- ---------------------------------------------------------------------
Operating Income before
other charges 65,365 60,299 65,112 63,592
Operating Income % before
other charges 36.9% 34.2% 37.2% 36.7%
Other Charges - - - -
- ---------------------------------------------------------------------
Operating Income $ 65,365 $ 60,299 $ 65,112 $ 63,592
Capital Expenditures $ 56,919 $ 34,424 $ 39,589 $ 22,969
Total Assets $1,033,655 $985,551 $970,943 $946,520
- ---------------------------------------------------------------------
Corporate Operations and Other:
Revenue $ 4,813 $ 5,789 $ 8,547 $ 9,354
Costs and Expenses 10,470 9,778 11,917 13,636
- ---------------------------------------------------------------------
EBITDA before other charges (5,657) (3,989) (3,370) (4,282)
EBITDA % before other
charges (117.5%) (68.9%) (39.4%) (45.8%)
Depreciation and Amortization 649 546 628 961
- ---------------------------------------------------------------------
Operating Loss before
other charges (6,306) (4,535) (3,998) (5,243)
Operating Loss % before
other charges (131.0%) (78.3%) (46.8%) (56.1%)
Other Charges - - - -
- ---------------------------------------------------------------------
Operating Loss $ (6,306) $ (4,535) $ (3,998) $ (5,243)
Capital Expenditures $ 28,926 $ 10,538 $ 8,413 $ 7,251
Total Assets $284,768 $250,847 $234,937 $244,409
- ---------------------------------------------------------------------
Consolidated:
Revenue $655,036 $658,208 $648,316 $631,998
Costs and Expenses 506,920 521,182 513,510 502,216
- ---------------------------------------------------------------------
EBITDA before other charges 148,116 137,026 134,806 129,782
EBITDA % before other charges 22.6% 20.8% 20.8% 20.5%
Depreciation and Amortization 60,724 55,871 53,971 55,240
- ---------------------------------------------------------------------
Operating Income before
other charges 87,392 81,155 80,835 74,542
Operating Income % before
other charges 13.3% 12.3% 12.5% 11.8%
Other Charges - - - (6,528)
- ---------------------------------------------------------------------
Operating Income (Loss) $ 87,392 $ 81,155 $ 80,835 $ 68,014
Capital Expenditures $328,556 $148,730 $133,641 $ 85,505
Total Assets $3,058,743 $2,803,263 $2,694,221 $2,584,826
- ---------------------------------------------------------------------
</TABLE>
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<TABLE>
FRONTIER CORPORATION
QUARTERLY BUSINESS SEGMENT INFORMATION
(Unaudited)
In thousands of dollars 4Q97 3Q97 2Q97 1Q97
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Integrated Services:
Revenue
Commercial $228,475 $233,266 $233,701 $229,337
Consumer 72,688 70,248 62,100 62,653
Carrier 112,706 106,610 98,258 103,096
Exited business-Prepaid 6,376 18,581 18,192 10,213
- ---------------------------------------------------------------------
Total 420,245 428,705 412,251 405,299
Cost of Access 276,498 276,901 253,587 260,999
- ---------------------------------------------------------------------
Gross Margin 143,747 151,804 158,664 144,300
Gross Margin % 34.2% 35.4% 38.5% 35.6%
Selling, General and
Administrative Expense 115,214 117,395 120,470 111,157
- ---------------------------------------------------------------------
EBITDA before other charges 28,533 34,409 38,194 33,143
EBITDA % before other charges 6.8% 8.0% 9.3% 8.2%
Depreciation and Amortization 25,641 27,952 22,312 22,939
- ---------------------------------------------------------------------
Operating Income before
other charges 2,892 6,457 15,882 10,204
Operating Income % before
other charges 0.7% 1.5% 3.9% 2.5%
Other Charges (79,256) - - (96,600)
- ---------------------------------------------------------------------
Operating Income (Loss) $(76,364) $ 6,457 $ 15,882 $(86,396)
Capital Expenditures $160,008 $ 61,965 $ 37,457 $ 57,471
Total Assets $1,327,651 $1,229,601 $1,177,903 $1,173,516
- ---------------------------------------------------------------------
Local Communications Services:
Revenue $169,989 $166,772 $166,987 $163,330
Costs and Expenses 78,880 79,631 79,661 76,331
- ---------------------------------------------------------------------
EBITDA before other charges 91,109 87,141 87,326 86,999
EBITDA % before other charges 53.6% 52.3% 52.3% 53.3%
Depreciation and Amortization 28,100 27,344 27,375 27,285
- ---------------------------------------------------------------------
Operating Income before
other charges 63,009 59,797 59,951 59,714
Operating Income % before
other charges 37.1% 35.9% 35.9% 36.6%
Other Charges (4,174) - - -
- ---------------------------------------------------------------------
Operating Income $ 58,835 $ 59,797 $ 59,951 $ 59,714
Capital Expenditures $ 39,403 $ 25,815 $ 28,208 $ 15,356
Total Assets $931,438 $895,316 $897,082 $903,355
- ---------------------------------------------------------------------
Corporate Operations and Other:
Revenue $ 10,362 $ 11,044 $ 10,878 $ 8,947
Costs and Expenses 12,724 11,530 11,788 9,969
- ---------------------------------------------------------------------
EBITDA before other charges (2,362) (486) (910) (1,022)
EBITDA % before other charges (22.8%) (4.4%) (8.4%) (11.4%)
Depreciation and Amortization 922 897 903 862
- ---------------------------------------------------------------------
Operating Loss before other
charges (3,284) (1,383) (1,813) (1,884)
Operating Loss % before
other charges (31.7%) (12.5%) (16.7%) (21.1%)
Other Charges (3,354) - - -
- ---------------------------------------------------------------------
Operating Loss $ (6,638) $ (1,383) $ (1,813) $ (1,884)
Capital Expenditures $ 9,229 $ 6,101 $ 5,242 $ 6,733
Total Assets $228,831 $218,777 $210,664 $199,172
- ---------------------------------------------------------------------
Consolidated:
Revenue $600,596 $606,521 $590,116 $577,576
Costs and Expenses 483,316 485,457 465,506 458,456
- ---------------------------------------------------------------------
EBITDA before other charges 117,280 121,064 124,610 119,120
EBITDA % before other charges 19.5% 20.0% 21.1% 20.6%
Depreciation and Amortization 54,663 56,193 50,590 51,086
- ---------------------------------------------------------------------
Operating Income before
other charges 62,617 64,871 74,020 68,034
Operating Income % before
other charges 10.4% 10.7% 12.5% 11.8%
Other Charges (86,784) - - (96,600)
- ---------------------------------------------------------------------
Operating Income (Loss) $(24,167) $ 64,871 $ 74,020 $(28,566)
Capital Expenditures $208,640 $ 93,881 $ 70,907 $ 79,560
Total Assets $2,487,920 $2,343,694 $2,285,649 $2,276,043
- ---------------------------------------------------------------------
</TABLE>
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<TABLE>
FRONTIER CORPORATION
CONSOLIDATED SUPPLEMENTAL INFORMATION
(Unaudited)
In thousands, except
per share data 4Q98 3Q98 2Q98 1Q98
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Integrated Services:
Product Revenue
Data (1) $ 31,102 $ 26,071 $ 22,181 $ 18,282
CLEC 47,151 42,346 35,464 28,148
Switched Voice and Other 394,674 407,566 407,019 403,116
Exited business-Prepaid
- ---------------------------------------------------------------------
Total Product Revenue $ 472,927 $ 475,983 $ 464,664 $ 449,546
- ---------------------------------------------------------------------
Minutes
Commercial 1,579,357 1,631,271 1,620,464 1,554,884
Consumer 263,741 272,486 284,895 313,397
Carrier 2,110,360 1,956,405 1,574,128 1,320,309
- ---------------------------------------------------------------------
Total Minutes 3,953,458 3,860,162 3,479,487 3,188,590
- ---------------------------------------------------------------------
Competitive Local Service
(CLEC) Access Lines 208 181 143 117
- ---------------------------------------------------------------------
Local Communications
Services Access Lines
Commercial 313 311 305 301
Consumer 721 713 708 707
- ---------------------------------------------------------------------
Total Access Lines 1,034 1,024 1,013 1,008
- ---------------------------------------------------------------------
Frontier Cellular Joint
Venture
Revenue $ 49,520 $ 50,848 $ 46,725 $ 41,559
EBITDA $ 17,369 $ 19,058 $ 17,193 $ 13,691
EBITDA % 35.1% 37.5% 36.8% 32.9%
Customers 387,654 361,543 347,421 333,397
- ---------------------------------------------------------------------
Earnings Normalization
Schedule
Accounting Charge for
Start-up Activities $ 2,564
Gain on Sale of Assets $ (5,209) $ (618) (14,551)
Acquisition of
GlobalCenter (2) $ 6,528
Restructuring Charge and
Asset Improvements
Redundant Leased
Network Charge
- ---------------------------------------------------------------------
Normalized Items $ (5,209) $ (618) $ (11,987) $ 6,528
- ---------------------------------------------------------------------
Diluted Earnings Per Common
Share as Reported $ 0.29 $ 0.26 $ 0.26 $ 0.20
Normalized Items Per Share (0.02) - - 0.03
- ---------------------------------------------------------------------
Normalized Diluted Earnings
Per Common Share $ 0.27 $ 0.26 $ 0.26 $ 0.23
- ---------------------------------------------------------------------
</TABLE>
<PAGE>
<PAGE>
<TABLE>
FRONTIER CORPORATION
CONSOLIDATED SUPPLEMENTAL INFORMATION
(Unaudited)
In thousands, except
per share data 4Q97 3Q97 2Q97 1Q97
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Integrated Services:
Product Revenue
Data (1) $ 7,403 $ 5,449 $ 5,404 $ 4,164
CLEC 23,396 18,847 17,335 15,046
Switched Voice and Other 383,070 385,828 371,320 375,876
Exited business-Prepaid 6,376 18,581 18,192 10,213
- ---------------------------------------------------------------------
Total Product Revenue $ 420,245 $ 428,705 $ 412,251 $ 405,299
- ---------------------------------------------------------------------
Minutes
Commercial 1,500,782 1,551,913 1,513,582 1,466,722
Consumer 341,871 329,460 310,734 327,363
Carrier 998,436 909,412 836,087 932,280
- ---------------------------------------------------------------------
Total Minutes 2,841,089 2,790,785 2,660,403 2,726,365
- ---------------------------------------------------------------------
Competitive Local Service
(CLEC) Access Lines 101 88 79 74
- ---------------------------------------------------------------------
Local Communications
Services Access Lines
Commercial 297 296 294 289
Consumer 701 697 693 692
- ---------------------------------------------------------------------
Total Access Lines 998 993 987 981
- ---------------------------------------------------------------------
Frontier Cellular Joint
Venture
Revenue $ 42,865 $ 41,092 $ 36,754 $ 35,239
EBITDA $ 15,526 $ 14,423 $ 11,487 $ 8,448
EBITDA % 36.2% 35.1% 31.3% 24.0%
Customers 320,779 307,690 296,061 284,462
- ---------------------------------------------------------------------
Earnings Normalization
Schedule
Accounting Charge for
Start-up Activities
Gain on Sale of Assets $ (18,765)
Acquisition of
GlobalCenter (2)
Restructuring Charge and
Asset Improvements $ 86,784
Redundant Leased
Network Charge 96,600
- ---------------------------------------------------------------------
Normalized Items $ 86,784 $ - $ - $ 77,835
- ---------------------------------------------------------------------
Diluted Earnings Per Common
Share as Reported $ (0.14) $ 0.19 $ 0.23 $ (0.10)
Normalized Items Per Share 0.32 - - $ 0.31
- ---------------------------------------------------------------------
Normalized Diluted Earnings
Per Common Share $ 0.18 $ 0.19 $ 0.23 $ 0.21
- ---------------------------------------------------------------------
(1) Any Private Line revenue for 1997 is reflected in the Switched
Voice product line.
(2) All Periods presented in the Consolidated Financial Statements
and Consolidated Supplemental information have been restated to
reflect the acquisition of GlobalCenter, Inc. in February 1998,
which has been accounted for using the pooling of interests
method of accounting.
</TABLE>
