Frontier Communications 2005 Annual Report Download - page 71

F-22
CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
As the result of our call of all of our 8.50% Notes in November 2004, we terminated five interest rate swaps
involving an aggregate $250,000,000 notional amount of indebtedness. Proceeds from the swap terminations of
approximately $3,026,000 and U.S. Treasury rate lock agreements of approximately $971,000 were applied against
the cost to retire the debt, resulting in a net premium of approximately $46,277,000 recorded in other income (loss),
net.
We do not anticipate any nonperformance by counter-parties to our derivative contracts as all counter-parties
have investment grade credit ratings.
(13) MANAGEMENT SUCCESSION AND STRATEGIC ALTERNATIVES EXPENSES:
On July 11, 2004, our Board of Directors announced that it had completed its review of our financial and
strategic alternatives, and on September 2, 2004, we paid a special, non-recurring dividend of $2.00 per common
share and a quarterly dividend of $0.25 per common share to shareholders of record on August 18, 2004. Concurrently,
Leonard Tow decided to step down from his position as chief executive officer, effective immediately, and resigned
his position as Chairman of the Board on September 27, 2004. The Board of Directors named Mary Agnes Wilderotter
president and chief executive officer in November 2004.
In 2004, we expensed approximately $90,632,000 of costs related to management succession and our exploration
of financial and strategic alternatives. Included are $36,618,000 of non-cash expenses for the acceleration of stock
benefits, cash expenses of $19,229,000 for advisory fees, $19,339,000 for severance and retention arrangements and
$15,446,000 primarily for tax reimbursements.
(14) OTHER INCOME (LOSS), NET:
The components of other income (loss), net for the years ended December 31, 2005, 2004 and 2003 are as
follows:
($ in thousands) 2005 2004 2003
Legal contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (7,000 ) $ — $ —
Gain on capital lease termination/restructuring . . . . . . . . . . . . . — — 69,512
Gain on expiration/settlement of customer advances . . . . . . . . . 681 25,345 6,165
Loss on exchange of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,175 ) — —
Premium on debt repurchases . . . . . . . . . . . . . . . . . . . . . . . . . . . — (66,480 ) (10,851 )
Gain on forward rate agreements . . . . . . . . . . . . . . . . . . . . . . . . . 1,851 — —
Gain (loss) on sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (1,945 ) (20,492 )
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,969 (10,279 ) (275)
Total other income (loss), net . . . . . . . . . . . . . . . . . . . . . . $ (1,674 ) $ (53,359 ) $ 44,059
In the fourth quarter of 2005, we recorded $7,000,000 of expense was recorded in connection with a legal
matter. In connection with our exchange of debt during the second quarter of 2005, we recognized a non-cash, pre-
tax loss of approximately $3,175,000. 2005 also includes a gain for the changes in fair value of our forward rate
agreements.
During 2005, 2004 and 2003, we recognized income in connection with certain retained liabilities associated
with customer advances for construction from our disposed water properties, as a result of some of these liabilities
terminating. During 2003, we recognized gains in connection with the termination/restructuring of capital leases at
ELI. Gain (loss) on sale of assets in 2004 is primarily attributable to the loss on the sale of our corporate aircraft
during the third quarter. In 2003, the amount represents the sales of The Gas Company in Hawaii and our Arizona
gas and electric divisions, access lines in North Dakota and our wireless partnership interest in Wisconsin, and our
Plano, Texas office building.