), a provider of telecommunication services to rural areas,
reported its first quarter adjusted earnings per share of 5 cents
that missed the Zacks Consensus Estimate by a penny. Adjusted
earnings remained flat with the year-ago level.
Adjusted earnings for the quarter exclude the negative impacts
of $35.1 million in integration charges and $6.5 million in
severance and early retirement charges.
Revenue of $1,268.1 million surpassed of the Zacks Consensus
Estimate of $1,260 million but dropped 5.8% year over year. The
decline from the year ago quarter was due to lower residential and
business customers, switched access, data services and video
On a year-over-year basis, local and long-distance services
revenues dropped 9.9% to $572.2 million, while data and Internet
services revenues declined 1.7% to $450.7 million. However, other
revenues registered an improvement of 11.6% to $96.9 million.
Frontier exited the quarter with 5.16 million total access
lines, down 7.9% year over year from 5.61 million lines in the
year-ago quarter. Both residential and business segments registered
a year-over-year decline - of 9.2% and 5.7% respectively.
Frontier added approximately 11,693 broadband customers in the
first quarter to reach 1.8 million (up 2.6% year over year)
customers in service. The company added 4,351 video customers,
bringing the total number of customers to 561,878 (up 2.8% year
Frontier exited the quarter with $365.8 million of cash and cash
equivalents compared with $326.1 million at year-end 2011.
Long-term debt decreased to $7.6 billion at the end of first
quarter from $8.2 billion at the end of 2011.
Frontier spent $$224.2 million as capital expenditure (including
business operations and integration activities) in the first
quarter compared to $209.1 million in the year-ago quarter. Free
cash flow was $253.2 million compared to $252.9 million in the
The company paid a total of $99.9 million in dividend in the
first quarter, which equates to a dividend payout of 39% of free
cash flow compared with dividend payments of $186.6 million, which
equated to dividend payout of 74% in the year ago quarter
For fiscal 2012
, the company's guidance remains unchanged. Capital expenditures
and free cash flow, excluding integration expenses and integration
capital expenditures, in the bands of $725-$775 million and $0.9-$1
billion, respectively. The company expects integration expenses and
integration capital expenditures of approximately $80 million and
$40 million, respectively.
Frontier focuses on generating new revenues through customer
retention, customer wins, new product deployments, broadband
expansion, and profitability and cash flow management through
reductions in operating expenses and capital expenditures. In
addition, the reduction of access line losses would boost
Frontier's profitability and provide cost synergies going
However, intense competition, a highly leveraged balance sheet,
regulatory pressure as well as integration risks in converting the
) properties into its own system might limit the earnings potential
in the upcoming quarters.
Consequently, we maintain our long-term Neutral recommendation
supported by a Zacks #3 Rank (Hold).
FRONTIER COMMUN (FTR): Free Stock Analysis
VERIZON COMM (VZ): Free Stock Analysis Report
To read this article on Zacks.com click here.