Frontier (FTR) announced fourth quarter results and a reduction in the yearly dividend from $0.75 to $0.40. They could not generate enough FCF (free cash flow) to support the old dividend. Additional details can be found here. Future pension funding shortfalls could affect FCF which could have an impact on future dividends.
When earnings are released we pour over the numbers to see what went right or wrong. There are some items that are not apparent when reading the earnings release such as the pension funding. Looking for pension liabilities isn’t on the radar for many. How often do we hear equity analysts grill management on pension obligations; rarely, if ever. We’ll review FTR’s 2011 pension expectations vs. actual results and 2012 expectations are going forward.
First a review of the 2011 pension expectations from the 10-K filing:
…Our actual return on plan assets in 2010 was 12.1%. For 2011, we will continue to assume a rate of return of 8.0%. Our pension plan assets are valued at fair value as of the measurement date. We expect that our pension and other postretirement benefit expenses for 2011 will be approximately …Click here to continue reading at SA…