Frontier Communications 2004 Annual Report Download - page 60

CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
F-16
are provided for known or impending telecommunications bankruptcies, disputes or other significant collection
issues.
An agreement was reached with WorldCom/MCI settling all pre-petition obligations and receivables. The
bankruptcy court approved the agreement and we reduced our reserves by approximately $6,600,000 in the fourth
quarter 2003 as a result of the settlement. During the second quarter 2002, we reserved approximately $21,600,000
of trade receivables with WorldCom as a result of WorldCom’s filing for bankruptcy. These receivables were
generated as a result of providing ordinary course telecommunications services. We have ongoing commercial
relationships with WorldCom.
Concurrent with the acquisition of Frontier, we entered into several operating agreements with Global Crossing. We
have ongoing commercial relationships with Global Crossing affiliates. We reserved a total of $29,000,000 of
Global Crossing receivables during 2001 and 2002 as a result of Global Crossing’s filing for bankruptcy to reflect our
best estimate of the net realizable value of receivables resulting from these commercial relationships. We recorded a
write-down of such receivables in the amount of $7,800,000 in 2002 and $21,200,000 in 2001. In 2002, as the result
of a settlement agreement with Global Crossing, we reversed $17,900,000 of our previous write-down reserve of the
net realizable value of these receivables.
(4) Property, Plant and Equipment:
The components of property, plant and equipment at December 31, 2004 and 2003 are as follows:
Depreciation expense is principally based on the composite group method. Depreciation expense was $446,190,000,
$468,438,000 and $630,113,000 for the years ended December 31, 2004, 2003 and 2002, respectively. Effective
January 1, 2003, as a result of the adoption of SFAS No. 143, “Accounting for Asset Retirement Obligations,” we
ceased recognition of the cost of removal provision in depreciation expense and eliminated the cumulative cost of
removal included in accumulated depreciation. In addition, we increased the average depreciable lives for certain of
our equipment in our ILEC segment. As part of the preparation and adoption of SFAS No. 143, we analyzed
depreciation rates for the ILEC segment and compared them to industry averages and historical expense data. Based
on this review, the Company increased the depreciable lives of certain assets.
During 2002, we recognized accelerated depreciation of $23,379,000 related to the change in useful lives of our
accounting and human resource systems and our Plano, Texas office building, furniture and fixtures as a result of a
restructuring.
(5) Losses on Impairment:
In the third and fourth quarters of 2003, we recognized non-cash pre-tax impairment losses of $4,000,000 and
$11,300,000, respectively, related to our Vermont electric division assets held for sale in accordance with the
provisions of SFAS No. 144.
Estimated
($ in thousands) Useful Lives 2004 2003
Land N/A 21,481$ 21,650$
Buildings and leasehold improvements 30 to 41 years 357,983 354,855
General support 3 to 17 years 425,720 411,660
Central office/electronic circuit equipment 5 to 11 years 2,536,579 2,421,341
Cable and wire 15 to 55 years 2,972,919 2,848,412
Other 5 to 20 years 31,993 53,303
Construction work in progress 93,049 114,988
6,439,724 6,226,209
Less: accumulated depreciation (3,101,424) (2,695,667)
Property, plant and equipment, ne
t
3,338,300$ 3,530,542$