Frontier Communications Parent, Inc. - FORM 8-K - EX-99.1 - PRESENTATION TO INVESTORS

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8-K - CURRENT REPORT - Frontier Communications Parent, Inc.	form8-k.htm

Exhibit 99.1

Frontier Communications

Investor Presentation

November 2009

Safe Harbor Statement

Forward-Looking Language

This presentation 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: Our ability to complete the acquisition of access lines from Verizon; the failure to obtain, delays in obtaining or
adverse conditions contained in any required regulatory approvals for the Verizon transaction; the failure to receive the IRS ruling approving the tax-free status of the Verizon
transaction; the ability to successfully integrate the Verizon operations into Frontier’s existing operations; the effects of increased expenses due to activities related to the
Verizon transaction; the ability to migrate Verizon’s West Virginia operations from Verizon owned and operated systems and processes to Frontier owned and operated systems
and processes successfully; the risk that the growth opportunities and cost synergies from the Verizon transaction may not be fully realized or may take longer to realize than
expected; the sufficiency of the assets to be acquired from Verizon to enable us to operate the acquired business; disruption from the Verizon transaction making it more difficult
to maintain relationships with customers, employees or suppliers; the effects of greater than anticipated competition requiring 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 access lines and High-Speed Internet subscribers; our
ability to sell enhanced and data services in order to offset ongoing declines in revenue from local services, switched access services and subsidies; the effects of ongoing
changes in the regulation of the communications industry as a result of federal and state legislation and regulation; the effects of competition from cable, wireless and other
wireline carriers (through voice over internet protocol (VOIP) or otherwise); our ability to adjust successfully to changes in the communications industry and to implement
strategies for improving growth; 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; reductions in switched access revenues as a result of regulation, competition and/or technology substitutions;
the effects of changes in both general and local economic conditions on the markets we serve, which can impact demand for our products and services, customer purchasing
decisions, collectability of revenue and required levels of capital expenditures related to new construction of residences and businesses; our ability to effectively manage service
quality; 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
our customers; changes in accounting policies or practices adopted voluntarily or as required by generally accepted accounting principles or regulators; our ability to effectively
manage our operations, operating expenses and capital expenditures, to pay dividends and to repay, reduce or refinance our debt; the effects of bankruptcies and home
foreclosures, which could result in increased bad debts; the effects of technological changes and competition on our capital expenditures and product and service offerings,
including the lack of assurance that our ongoing network improvements will be sufficient to meet or exceed the capabilities and quality of competing networks; the effects of
increased medical, retiree and pension expenses and related funding requirements; changes in income tax rates, tax laws, regulations or rulings, and/or federal or state tax
assessments; the effects of state regulatory cash management policies on our ability to transfer cash among our subsidiaries and to the parent company; our ability to
successfully renegotiate union contracts expiring in 2009 and thereafter; declines in the value of our pension plan assets, which could require us to make contributions to the
pension plan beginning no earlier than 2010; our ability to pay dividends in respect of our common shares, which may be affected by our cash flow from operations, amount of
capital expenditures, debt service requirements, cash paid for income taxes and our liquidity; the effects of any unfavorable outcome with respect to any of our current or future
legal, governmental or regulatory proceedings, audits or disputes; the possible impact of adverse changes in political or other external factors over which we have no control;
and the effects of hurricanes, ice storms or other severe weather. 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
undertake no obligation to publicly update or revise any forward-looking statements or to make any other forward-looking statement, whether as a result of new information,
future events or otherwise unless required to do so by securities laws.

Additional Information and Where to Find it

This filing is not a substitute for the definitive prospectus/proxy statement included in the Registration Statement on Form S-4 that Frontier filed, and the SEC has declared
effective, in connection with the proposed transactions described in the definitive prospectus/proxy statement. INVESTORS ARE URGED TO READ THE DEFINITIVE
PROSPECTUS/PROXY STATEMENT BECAUSE IT CONTAINS IMPORTANT INFORMATION, INCLUDING DETAILED RISK FACTORS. The definitive prospectus/proxy statement and
other documents filed or to be filed by Frontier with the SEC are or will be available free of charge at the SEC’s website, www.sec.gov, or by directing a request when such a
filing is made to Frontier, 3 High Ridge Park, Stamford, CT 06905-1390, Attention: Investor Relations.

This communication shall not constitute an offer to sell or the solicitation of an offer to buy securities, nor shall there be any sale of securities in any jurisdiction in which such
offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.

Frontier’s stockholders approved the proposed transactions on October 27, 2009, and no other vote of the stockholders of Frontier or Verizon is required in connection with the
proposed transactions.

Non-GAAP Financial Measures

The Company uses certain non-GAAP financial measures in evaluating its performance. These include free cash flow and EBITDA or “operating cash flow”
which we define as operating income plus depreciation and amortization. A reconciliation of the differences between EBITDA and free 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 generally accepted accounting principles and are not alternatives to operating
income or net income 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 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. Management uses these non-GAAP
financial measures to plan and measure the performance of its core operations, and its divisions measure performance and report to management based
upon these measures. In addition, the Company believes that free cash flow and EBITDA, as the Company defines them, can assist in comparing
performance from period to period, without taking into account factors affecting 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 severance and
early retirement costs in 2004, 2005, 2006, 2007 and 2008, a pension curtailment gain in 2007, the favorable impact of a significant carrier dispute
settlement in 2007, legal settlement costs and related expenses in 2007 and 2008 and management succession and strategic alternatives expenses in
2004 because the Company believes that the magnitude of such costs incurred in any one period materially exceeds that which has been incurred by the
Company in any other period during 2004 through 2008 and/or 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. The
Company believes that the non-GAAP financial measures are meaningful and useful for the reasons outlined above.

While the Company utilizes these non-GAAP financial measures in managing and analyzing its business and financial condition and believes they are
useful to management and to investors for the reasons described above, 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. EBITDA 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 presentation should be read in conjunction with the financial
statements and footnotes contained in our documents filed with the U.S. Securities and Exchange Commission.

Company Overview

Frontier Communications today is ……

Frontier Communications Corporation (NYSE: FTR) is one of the nation's largest rural local
exchange carriers, offering local and long-distance telephone service, broadband Internet access,
wireless Internet access, DISH satellite TV and more…..

Key Metrics 1
States	24
Access Lines	2,151,708
High Speed Internet Subscribers	621,331
LTM 9/30/2009 Revenue ($ in million)	$2,144
LTM 9/30/2009 EBITDA2 ($ in million)	$1,160
LTM 9/30/2009 FCF ($ in million)	$476

1. Metrics as of September 30, 2009.

2. Represents Operating Cash Flow (EBITDA), as adjusted. For a detailed reconciliation of Operating Cash Flow (EBITDA), please see slide 29.

•Geographic Highlights

•Rural Footprint (13 Households / Sq Mile)

•24 States; 285 counties; 70 Local Market Clusters

•Mature Cable VOIP Competition (70% of Our Footprint1)

Geographic Footprint

Key Value Drivers

Unique Customer Experience

Robust Local & National Network

Consistent Execution of Financial and

Operational Goals

Solid and Improving Balance Sheet Position

Unique Customer Experience

• Big Company
Advantages, Small
Company Feel

• Local Manager Structure

• Unique Welcome Process

• Exceptional Service
Levels

• 2 Hour Appointment
Windows

Delivering a “Peace of
Mind” Experience

• Simple Double Play &
Triple Play Bundles

• Good, Better, Best
Choices for Voice, Video,
Data

• Peace of Mind Product
Suite

• Directory Advertising

• Wireless Data

Broad Spectrum of
Products and Services

• Multi-Year Price
Protection Plans

• Loyalty Programs

• Aspirational Gifts

• Community Connections

• Take The Lead Referrals

Innovative Marketing
Programs

Robust Local & National Network

•Extensive Local Networks

• 1,007 ILEC Exchanges

• 1,024 Central Offices

• Fiber To Home In All Greenfield Builds

• Approximately 41% Of Frontier Local
Networks Are Capable of Providing
20Mbps Service, and 92% are
Capable of Providing at Least 1Mbps
Service. 1

• Flexible network architecture allows delivery of advanced
services to residential and business customers

Notes

1. Based on Loop Length Capability View as of 9/30/09. This measure shows network
bandwidth capability based on the length of the loop in conjunction with the deployment of a
DSLAM for that loop. This view does not show product availability, which is based on other
factors, as discussed on slide 9.

Robust Local & National Network (continued)

•Extensive HSI
Availability

• Broadband speeds 1
in our network
continue to increase.

•Well Positioned to
Support Continued
Growth of High
Speed Subscribers

Notes

1. Data in the top chart is our Product Availability View as of
9/30/09. This measure shows commercial product
availability based on the length of the loop, the deployment
of a DSLAM for the loop, the DSL technology that’s deployed,
and the uplink capacity serving the DSLAM.

Consistent Execution of Financial and Operational Goals

• Strong, Stable Free Cash
Flow Generation

• Maintaining Stable Revenues

ü Delivering Quality Products and
Services our Customers Want

ü Reducing Churn With Bundles 1

ü Driving Customer Revenues 2

• Building a Culture that
Drives Results

• Hiring and Retaining “Great
Athletes”

• Innovative Solutions to
Increase Workforce Efficiency

• Standardized Field Processes

• Cultivating Strong Relationships
with our Labor Unions and
Regulatory Agencies

Consistent Execution: Industry-Leading Metrics

1. Represents the yr/yr change in the combined ending base of access lines and HSI subscribers.

2. Excludes wireless. Cable represents network operations only.

Monthly EBITDA / Employee 3Q09

Line Loss Yr/Yr

Source: SEC filings; Wall
Street research; Frontier.

(3.3)%

(2.2)%

(4.0)%

(6.5)%

(6.7)%

(7.6)%

(8)%

(7)%

(6)%

(5)%

(4)%

(3)%

(2)%

FTR

WIN

CTL

Change in Lines + HSI Subs (1) 3Q09

Solid and Improving Balance Sheet Position

Notes

1. Reduction in debt obligations as of October 31, 2009 results from the $700.0 million debt tender offer.

•Preparing for Verizon

• Reducing near-term
maturities.

•Good Liquidity

• Undrawn $250M Revolver

• $100M minimum cash-on-
hand policy.

•Moderate Leverage

• 3.9x at 3Q 2009

•Access to Capital

Verizon Transaction Overview

The “New” Frontier….

l TRANSFORMATIONAL TRANSACTION for Frontier

l Becomes the fifth largest ILEC in the US with 7 million access lines in 27 states

l Becomes the nation’s largest communications service provider focused on rural areas
and small and medium-sized towns and cities

l Improves balance sheet strength; increases financial and operational
flexibility

l Pro forma leverage of 2.6x

l Attractive and sustainable dividend policy

l Free cash flow per share accretive in year 2

l Delivers substantial long-term shareholder value

l Creates a strong platform for continued growth and improves the
company’s overall strategic position

Verizon

Stockholders

Frontier
Stockholders

Verizon

Frontier

(FTR + SpinCo
Lines)

32%

$3,333M

l SpinCo pays Verizon
$3,333M in cash or
debt relief

l Verizon distributes
100% of SpinCo to
Verizon shareholders

l SpinCo merges with
Frontier; Frontier is
the surviving entity

Parameter	Frontier (1)	SpinCo	Total
Price/Share	$ 7.75	$ 7.75	$ 7.75
Shares Outstanding	312	677	989
Equity Value	$ 2,421	$ 5,247	$ 7,668
Net Debt	4,547	3,333	8,005
Firm Value	$ 6,968	$ 8,580	$ 15,673

2008 EBITDA (3)	$ 1,214	$ 1,890	$ 3,104
FV/'08 EBITDA	5.7x	4.5x	5.0x
Net Debt/'08 EBITDA	3.8x	1.8x	2.6x

l Share price collar of
$7.00 - $8.50 per
share; 617 - 750M
shares (66-71%)
Verizon stockholder
ownership

Transaction Summary

(1) As of 3/31/09

(2) Includes $125 million of financing for integration costs

(3) FY 2008 Pro forma EBITDA, excludes synergies

(2)

2008 Statistics

Frontier

SpinCo

Sub-Total

Synergies

Total

Key Pro forma financial data

Revenue

$2,237

$4,257

$6,494

EBITDA

1,214

1,890

3,104

500

3,604

% EBITDA Margin

54.3%

44.4%

47.8%

55.5%

Interest Expense

(363)

(290)

(653)

Cash Taxes

(79)

(285)

(364)

(190)

(554)

Capital Expenditure

(288)

(413)

(701)

Other

Free Cash Flow

$493

$902

$1,395

$310

$1,705

Net Debt / EBITDA

3.8x

1.8x

2.6x

2.2x

EBITDA / Interest Exp.

3.3x

6.5x

4.8x

5.5x

Dividend ($0.75 / share)

$742

Dividend Payout Ratio

53%

43%

(2)

(1)

(3)

Notes

(1) Adjusted to exclude Severance and Early Retirement Costs and Legal Settlement Costs.

(2) 2008 audited financial statements adjusted for certain matters.

(3) Assuming Frontier issues share at the mid-point of the collar.

Transaction Overview

Transaction Structure	l Reverse Morris Trust l Simultaneous tax-free spin-off of SpinCo and merger with Frontier
Valuation	l SpinCo Enterprise Value: $8.6B l Implied purchase multiple of 4.5x SpinCo’s FY 2008 EBITDA
Financing	l Equity consideration based on Frontier’s 30 day average share price at time of close l Subject to a collar of $7.00 - $8.50, 66% - 71% VZ stockholder ownership l Fixed number of shares outside the collar l Approximately $3.3 Billion of debt to be raised prior to closing l Substantially all proceeds to be paid to Verizon
Governance	l Maggie Wilderotter, Chairman & Chief Executive Officer l Frontier management leadership l 12 member board (Verizon delegates 3 new members to Frontier’s existing board)
Post Closing Dividend Policy	l Annual dividend of $0.75 per share, reduced from current $1.00 per share
Estimated Synergies	l Revenue upside from broadband, long distance, video and bundles l $500M of cash OpEx savings (21% of 2008 SpinCo cash OpEx)
Required Approvals	l Hart Scott Rodino (completed) l Frontier shareholder approval (completed) l Verizon IRS ruling l FCC and certain state and local regulatory approvals
Expected Closing	l Q2 2010

Transaction Rationale

Rural Profile	l SpinCo properties have an average of 37 households per sq. mile l 70% of lines in rural areas l Less than 1% of lines in urban areas
Complementary Footprint	l Frontier currently has operations in 11 of the 14 states in which SpinCo operates
Attractive Demographics	l Properties have a similar profile to Frontier’s current footprint l Median income of $50.1K, 74% home ownership, average age of 48
Upside for Organic Growth	l Ability to implement Frontier’s proven “go-to-market” strategy l Local engagement model will improve customer loyalty and drive revenue performance
Ability to Leverage Scale	l Leverage scalability of common support functions (e.g. IS, Accounting) l Ability to achieve synergies from operating and capital expenditures
Reasonable Capital Investment	l Currently, broadband is only available to ~60% of households l Opportunity to expand broadband deployment
Free Cash Flow Accretive	l The transaction drives significant free cash flow per share accretion in year 2 and beyond
Improves Dividend Payout Ratio	l $0.75 per share dividend after closing l Payout ratio declines based on new dividend policy and increased cash flow

	l 13 states run on a separate billing platform that comes with SpinCo in the acquisition; Only one state, representing 13% of SpinCo access lines, required to be converted to Frontier by closing.
	l This is a deleveraging transaction. FY 2008 pro forma combined leverage of 2.6x - approaching investment grade.
	l Substantially the same rural profiles as Frontier has today. Predominately rural markets (37 households / sq. mile); less than 1% of the footprint is urban. We already operate in 11 of the 14 states.
	l Frontier management successfully operates a 2M + access line business, generating $2.2B of revenue in 24 states. We have successfully integrated Rochester Telephone, Commonwealth Telephone and Global Valley Networks realizing greater than anticipated synergies, and have consolidated 7 billing systems in the past 5 years.

Why This is Different From Other RLEC M&A

System Conversion
Experience

Deleveraging
Transaction

Strong Rural Markets

Track Record of
Successful
Integrations

FY 2008 Key Metrics

Frontier
Standalone

Frontier

Pro Forma

Revenue:	$2.2B	$6.5B
EBITDA (1):	$1.2B	$3.1B
Ending Access Lines:	2.3M	7.0M
Number of States:	24	27

Pro Forma

% of

West Virginia

761

10.8%

Indiana

723

10.2%

New York

684

9.7%

Illinois

671

9.5%

Ohio

635

9.0%

Washington*

578

8.2%

Michigan

526

7.5%

Pennsylvania

427

6.1%

Wisconsin

343

4.9%

Oregon

323

4.6%

North Carolina*

263

3.7%

Minnesota

211

3.0%

California

168

2.4%

Arizona

152

2.2%

Idaho

133

1.9%

South Carolina*

128

1.8%

Tennessee

1.1%

Nevada

0.8%

Iowa

0.6%

Nebraska

0.6%

Alabama

0.4%

Utah

0.3%

Georgia

0.3%

New Mexico

0.1%

Montana

0.1%

Mississippi

0.1%

Florida

0.1%

Total

7,045

Pro Forma Access Lines By State

(1) Excludes synergies.

Combined Company Snapshot

Combined Company Access Line Detail

Frontier

SpinCo

Combined

West Virginia

143,982

617,036

761,018

Indiana

4,647

718,251

722,898

Illinois

97,461

573,321

670,782

Ohio

552

634,153

634,705

Michigan

19,102

507,462

526,564

Wisconsin

62,007

281,350

343,357

Oregon

12,626

309,904

322,530

California

143,871

24,205

168,076

Arizona

145,241

6,297

151,538

Idaho

20,035

113,002

133,037

Nevada

23,701

35,989

59,690

673,225

3,820,970

4,494,195

Washington

578,506

North Carolina

263,479

South Carolina

127,718

969,703

New York

683,880

Pennsylvania

427,489

Minnesota

210,983

Tennessee

79,014

Iowa

44,891

Nebraska

43,106

Alabama

25,980

Utah

21,718

Georgia

19,167

New Mexico

8,001

Montana

7,659

Mississippi

5,474

Florida

3,746

1,581,108

2,254,333

4,790,673

7,045,006

2008 Revenue ($B)

2008 EBITDA ($B)

Total Access Lines (M)

Voice + Broadband Connections (M)

Source: Company filings and Wall Street research - 2008 data.

(1) Pro forma for Embarq acquisition, excluding Logistics.

(2) Reflects Qwest Wireline only.

2.3

3.0

7.0

7.7

11.6

Frontier

WIN

Frontier
Pro
Forma

CTL

$2.2

$3.2

$6.5

$8.3

$13.0

$10

$15

$20

Frontier

WIN

Frontier

Pro

Forma

CTL

2.8

4.0

8.6

9.7

14.4

Frontier

WIN

Frontier

Pro

Forma

CTL

$1.2

$1.6

$3.1

$3.9

$6.9

Frontier

WIN

Frontier

Pro

Forma

CTL

Frontier Gains Size & Scale

(1)

(2)

(1)

(2)


Revenue Opportunity	l Increased Broadband availability l Frontier market approach improves critical customer metrics l Access line losses l HSI penetration l Long distance penetration l Video penetration


Synergies	l Executive Management l Legal l Information Systems l Finance & Accounting	~ $500M Annually

Substantial Revenue & Cost Saving Opportunities

Access Line Decline

Long Distance Penetration

HSI Penetration

Satellite TV Penetration

Significant Operational Upside Potential

Broadband Availability

What You Can Expect From Us

• Provide a Unique Customer Experience

• Annual Growth in Customer Revenue

• New Products and Innovative Marketing

• Efficient Execution of Our Operating Strategy

• “Competitively Fit” - Lean & Flexible

• Consistently Strong EBITDA Margins

• Continuous Achievement of Cost Reduction Initiatives

Pro Forma Verizon Transaction - the “New Frontier”

• Significant Deleveraging to 2.6x (with a target of less than
2.5x leverage = Investment Grade)

• Free Cash Flow Accretive

• Platform for Continued Growth and Improved Strategic
Position

Appendix

Annual Frontier Selected Financial Metrics


($ in Millions)	2004	2005	2006	2007	2008
Revenue	$2,022	$2,017	$2,025	$2,288	$2,237
Customer Revenue 1	$1,565	$1,586	$1,597	$1,809	$1,832
- % Growth	1.5%	1.3%	0.7%	0.9%2	-1.0% 3
HSI Penetration	9.4%	14.2%	18.5%	21.5%	25.7%
EBITDA 4	$1,102	$1,116	$1,128	$1,213	$1,214
EBITDA Margin %	54.5%	55.3%	55.7%	53.9%	54.3%
CAPEX	$264	$259	$269	$316	$288
- % of Revenue	13.1%	12.8%	13.3%	13.8%	12.9%
Free Cash Flow 5	$503	$544	$562	$528	$493
- % of Revenue	24.9%	27.0%	27.7%	23.1%	22.0%

Notes

1. Customer revenue is defined as total revenue less access services. Access services include switched network access and subsidies.

2. % Growth for 2007 excludes $196.4M of revenue from acquisitions in 2007.

3. % Growth for 2008 compares 2008 results versus 2007 results Pro Forma for an additional 2.25 months of CTE, the acquisition of GVN and the sale of the CTE Equipment Co.

4. Represents Operating Cash Flow (EBITDA), as adjusted. For a detailed reconciliation of Operating Cash Flow (EBITDA), please refer to slide 28.

5. Free cash flow includes ELI for all years prior to its sale in July 2006. For a detailed reconciliation of free cash flow, please refer to slide 30.

Reconciliation of Non-GAAP Financial Measures

($ in 000's)

2004

2005

2006

2007

2008

EBITDA (Operating Cash Flow)

Operating Income

460,301

588,968

644,490

705,416

642,456

Add back:

Depreciation and amortization

549,381

520,204

476,487

545,856

561,801

EBITDA (Operating Cash Flow), as reported

1,009,682

1,109,172

1,120,977

1,251,272

1,204,257

Add / (Subtract)

Severance and early retirement costs

1,182

6,981

7,193

13,874

7,597

Pension curtailment gain (Non Cash)

(14,379)

Legal settlement costs

816

2,113

Carrier dispute settlement

(38,700)

Management succession and strategic alternatives expenses

90,632

EBITDA (Operating Cash Flow), as adjusted

1,101,496

1,116,153

1,128,170

1,212,883

1,213,967

Revenue, as reported

2,022,378

2,017,041

2,025,367

2,288,015

2,237,018

Deduct:

Favorable revenue settlement (one-time)

(38,700)

Revenue, as adjusted

2,022,378

2,017,041

2,025,367

2,249,315

2,237,018

EBITDA (Operating Cash Flow), as adjusted as % of Adj. Revenue

54.5%

55.3%

55.7%

53.9%

54.3%

For the years ended December 31,

Reconciliation of Non-GAAP Financial Measures

(1) Includes pension expense of $30.3 million, less amounts capitalized into the cost of capital expenditures of
$5.5 million for the nine months ended September 30, 2009.

Acquisition

Severance

and

and Early

Non-cash

Operating Cash Flow and

Integration

Retirement

Pension

Operating Cash Flow Margin

Reported

Costs

(1)

Adjusted

Operating Income

448,616

(14,457)

(2,567)

(24,802)

490,442

Add back:

Depreciation and

amortization

373,499

Operating cash flow

822,115

(14,457)

(2,567)

(24,802)

863,941

Revenue

1,596,914

Operating income margin

(Operating income divided

by revenue)

28.1%

30.7%

Operating cash flow margin

(Operating cash flow divided

by revenue)

51.5%

54.1%

For the nine months ended September 30, 2009

Reconciliation of Non-GAAP Financial Measures

($ in 000's)

2004

2005

2006

2007

2008

Net income

72,150

202,375

344,555

214,654

182,660

Add back:

Depreciation and amortization

549,381

520,204

476,487

545,856

561,801

Income tax expense

4,247

75,270

136,479

128,014

106,496

Management succession and strategic alternatives expenses

90,632

Stock based compensation

10,963

8,427

10,340

9,022

7,788

Subtract:

Cash paid (refunded) for income taxes

(4,901)

4,711

5,365

54,407

78,878

Pension Curtailment Gain (Non-Cash)

14,379

Other income (loss), net

(34,242)

(2,843)

60,271

(15,038)

(1,594)

Capital expenditures

263,949

259,448

268,806

315,793

288,264

Gain on sale of discontinued operations

1,167

71,635

Free cash flow

502,567

543,793

561,784

528,005

493,197

Revenue

2,022,378

2,017,041

2,025,367

2,288,015

2,237,018

Free cash flow as % of Revenue, as reported

24.9%

27.0%

27.7%

23.1%

22.0%

For the years ended December 31,

Reconciliation of Non-GAAP Financial Measures

(1)

Includes pension expense of $30.3 million and $(0.5) million, less amounts capitalized into the cost of capital expenditures of $5.5 million and $(0.1) million,
for the nine months ended September 30, 2009 and 2008, respectively.

(2)

Includes gain on debt repurchases of $7.8 million for the nine months ended September 30, 2009, and premium on debt repurchases of $6.3 million
for the nine months ended September 30, 2008.

(3)

Excludes capital expenditures of $2.6 million related to Verizon integration activities for the nine months ended September 30, 2009.

(Amounts in thousands)

2009

2008

Net Income to Free Cash Flow ;

Net income

118,011

149,486

Add back:

Depreciation and amortization

373,499

422,986

Income tax expense

65,328

76,717

Acquisition and integration costs

14,457

Pension expense (non-cash)

(1)

24,802

(421)

Stock based compensation

6,974

9,211

Subtract:

Cash paid for income taxes

59,953

70,174

Other income (loss), net

(2)

14,038

(91)

Capital expenditures

(3)

161,893

204,199

Free cash flow

367,187

383,697

For the nine months ended September 30,

Frontier Communications

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