Exhibit RWS-3 Page 1 of 114 FRONTIER COMMUNICATIONS CORP FORM 10-K (Annual Report) Filed 02/27/14 for the Period Ending 12/31/13 Address HIGH RIDGE PK BLDG 3 STAMFORD, CT 06905 Telephone 2036145600 CIK 0000020520 Symbol FTR SIC Code 4813 - Telephone Communications, Except Radiotelephone Industry Communications Services Sector Services Fiscal Year 12/31 http://www.edgar-online.com © Copyright 2014, EDGAR Online, Inc. All Rights Reserved. Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use. Exhibit RWS-3 Page 2 of 114 FRONTIER COMMUNICATIONS CORPORATION FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE YEAR ENDED DECEMBER 31, 2013 Exhibit RWS-3 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Page 3 of 114 WASHINGTON, D.C. 20549 FORM 10-K (Mark one) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2013 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to ___________ Commission file number 001-11001 FRONTIER COMMUNICATIONS CORPORATION (Exact name of registrant as specified in its charter) Delaware 06-0619596 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 3 High Ridge Park Stamford, Connecticut 06905 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (203) 614-5600 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, par value $.25 per share The NASDAQ Stock Market LLC Series A Participating Preferred Stock Purchase Rights The NASDAQ Stock Market LLC Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes X No __ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes No X Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes X No __ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large Accelerated Filer Accelerated Filer Non-Accelerated Filer Smaller Reporting Company Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes No X The aggregate market value of common stock held by non-affiliates of the registrant on June 2 8 , 2013 was $ 4,025,490,000 based on the closing price of $4.05 per share on such date. The number of shares outstanding of the registrant' s common stock as of February 14, 2014 was 999,462,000. DOCUMENT INCORPORATED BY REFERENCE Portions of the Proxy Statement for the Company's 2014 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K. Exhibit RWS-3 FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES Page 4 of 114 TABLE OF CONTENTS PART I Page No. Item 1. Business 2 Item 1A. Risk Factors 14 Item 1B. Unresolved Staff Comments 23 Item 2. Properties 23 Item 3. Legal Proceedings 23 Item 4. Mine Safety Disclosures 23 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 24 Item 6. Selected Financial Data 26 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 27 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 47 Item 8. Financial Statements and Supplementary Data 48 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Dislcosure 48 Item 9A. Controls and Procedures 48 Item 9B. Other Information 48 PART III Item 10. Directors, Executive Officers and Corporate Governance 48 Item 11. Executive Compensation 50 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 50 Item 13. Certain Relationships and Related Transactions, and Director Independence 50 Item 14. Principal Accountant Fees and Services 50 PART IV Item 15. Exhibits and Financial Statement Schedules 50 Signatures 54 Index to Consolidated Financial Statements F-1 Exhibit RWS-3 FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES Page 5 of 114 PART I Item 1. Business Frontier Communications Corporation (Frontier) is the largest communications company providing services predominantly to rural areas and small and medium-s ized towns and cities in the United States . Frontier and its subsidiaries are referred to as the “Company,” “we,” “us” or “our” throughout this report. Frontier was incorporated in the state of Delaware in 1935, originally under the name of Citizens Utilities Company, and was known as Citizens Communications Company from 2000 until July 31, 2008. Our mission is to be the leader in providing communications services to residential and business customers in our markets. We are committed to delivering innovative and reliable products and solutions with an emphasis on convenience, service and customer satisfaction. We offer a variety of voice, data, and television (TV) services and products, some that are available on a standalone basis, and others that are available as bundled or packaged solutions. We believe that our local engagement structure, 100% U.S.–based workforce and innovative product positioning will continue to differentiate us from our competitors in the markets in which we compete. Highlights for 2013 In 2013, we continued to improve our customer metrics and revenue tr ends while strengthening our financial profile as follows: • Broadband Net Additions During 2013, we added approximately 112,2 5 0 net broadband subscribers (an increase of approximately 6.4%) , which exceed ed the total net additions for the last three years combined, bringing our total number of broadband subscribers to 1,866,700 as of December 31, 2013. The net increase in broadband subscribers contribute d to our improved revenue performance . We continue d to invest in network speed and capacity to support our goal of attracting additional customers and increasing broadband penetration. In 2013, our broadband availability increased by 167,000 new households, and we are now able to offer broadband to over 6.4 million households as of December 31, 2013 . During 201 3 and 201 2 , Frontier received a total of $71.9 million from the first round of the Federal Communications Commission’s (FCC) Connect America Fund (CAF) Phase I and $57.6 million related to the second round of CAF Phase I to support broadband deployment in unserved and underserved high-cost areas. In January 2014, we received an additional $3.7 million. We spent $32.7 million and $4.8 million of these funds on network expansion in 2013 and 2012, respectively , enabling 64,4 00 new households with broadband . • Improved Customer Metrics Our rate of residential customer loss improved to 3 % during 2013 as compared to 7% for 2012. We believe that this improvement in customer retention is principally due to investments in our network, our local engagement strategy, improved customer service and the introduction of our stand alone Simply Broadband product. In addition to our increase in broadband subscribers, we added over 38,700 net video subscribers during 2013. Our average monthly residential revenue per customer in 2013 improved by $ 0.97 , or approximately 2 %, to $ 59.30 , as compared to the prior year. Our average monthly business revenue per customer in 2013 improved by $ 14.13 , or approximately 2 %, to $ 653.26 , as compared to the prior year. • Strengthened Balance Sheet and Financial Profile In April 2013, we raised $750.0 million in a registered debt offering of 7 .625% senior unsecured notes due 2024. We used the net proceeds, together with cash on hand, to finance cash tender offers, and otherwise retire and repurchase debt in the aggregate principal amount of $ 1,563.0 million during the year. These actions have enabled us to reduce our debt maturities in 2014, 2015 and 2016 to $257.9 million, $259.8 million and $345.5 million, respectively, which we believe can be funded from net cash provided by operating activities during each of the next three years. For the year ended December 31, 2013, we generated revenue of $ 4.8 billion, including customer revenue of $ 4.2 billion and regulatory revenue of $ 0.6 billion, and net cash provided by operating activities of $ 1.5 billion .