Frontier Communications(FYBR) - 2024 Q4 - Annual Report

Revenue Growth and Customer Metrics - Frontier Communications reported a revenue growth of 3% year-over-year, with fiber revenue increasing by 14% to $3.402 billion, while copper revenue declined by 8% to $2.471 billion[220]. - The company achieved fiber broadband customer growth of 19%, adding 385,000 net fiber broadband customers, resulting in a total of approximately 2.249 million consumer fiber broadband customers[204]. - The total number of broadband customers increased by 2% to 3.193 million, driven by net additions of fiber broadband customers[215]. - Consumer revenue increased by 2% to $3,163 million, driven by growth in fiber data and value-added services, despite declines in voice and video services[227]. - Business and wholesale revenue rose by 5% to $2,710 million, primarily due to increases in fiber broadband and network access services[225]. Financial Performance - Total revenue for the year ended December 31, 2024, was $5,937 million, a 3% increase from $5,751 million in 2023[223]. - Operating income decreased to $353 million for the year ended December 31, 2024, down from $492 million in 2023, primarily due to declines in voice and video services revenue[205]. - Total operating expenses increased by 6% to $5,584 million, with significant increases in depreciation and amortization expenses by 15%[240]. - Interest expense rose by $151 million, or 23%, to $804 million, driven by a higher debt balance[253]. - Cash flows from operating activities increased by $277 million to $1,621 million for the year ended December 31, 2024, primarily due to changes in working capital[262]. Merger and Acquisition - The company entered into a Merger Agreement with Verizon, with Verizon set to acquire Frontier for $38.50 per share, representing a 43.7% premium[202]. - The company expects to close the merger with Verizon by the first quarter of 2026, pending regulatory approvals[202]. Cost Savings and Efficiency - Frontier achieved $597 million in gross annualized cost savings since 2021, exceeding its initial target of $250 million[204]. - The company anticipates that its operating cash flows and existing cash balances will be sufficient to meet its working capital and capital expenditure needs over the next twelve months[271]. Capital Expenditures and Investments - Cash flows used by investing activities decreased to $1,681 million in 2024 from $2,556 million in 2023, attributed to a $428 million reduction in capital expenditures[265]. - Capital expenditures for 2024 were $2,783 million, down from $3,211 million in 2023, with a shift in capital payments classified as financing activities[266]. Debt and Liquidity - As of December 31, 2024, the company had liquidity of approximately $2,910 million, including cash and cash equivalents of $750 million[255]. - The company has total long-term debt obligations of $11,569 million, with interest obligations of $3,748 million, and total future contractual obligations amounting to $15,987 million[291]. - The company has $1,500 million in DDTL Facility and $925 million in Revolving Facility available for liquidity, with $265 million reserved for letters of credit[269]. Pension and Benefit Obligations - The unfunded benefit obligation for the company's pension and other postretirement benefit plans was $630 million as of December 31, 2024, with cash contributions of $171 million made during the year[309]. - The company’s expected long-term rate of return on pension plan assets was adjusted to 6.65% for the period from October 1, 2024, to December 31, 2024, down from 7.50%[312]. - The company’s actual return on pension plan assets for the year ended December 31, 2024, was a gain of 5%[312]. Regulatory and Compliance - As of December 31, 2024, the company was in compliance with all covenants under existing indentures and the Amended and Restated Credit Agreement[287]. - The financial maintenance covenant leverage ratio is set to not exceed 5.25:1.00 starting June 30, 2024, with a step-down to 4.75:1.00 beginning March 31, 2027[280]. Market and Risk Management - The company does not hold or issue derivative instruments for trading purposes, indicating a conservative approach to market risk management[318]. - The company has no significant equity security investments outside of its pension plan assets, limiting its exposure to equity price risk[324]. - The company aims to limit the impact of interest rate changes on earnings and cash flows while lowering overall borrowing costs[320].