Frontier Communications 2006 Annual Report Download

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CITIZENS COMMUNICATIONS COMPANY
2006 ANNUAL REPORT
SM

Table of contents

  • Page 1
    CITIZENS COMMUNICATIONS COMPANY 2006 ANNUAL REPORT SM

  • Page 2
    ... its charter) Delaware (State or other jurisdiction of incorporation or organization) 3 High Ridge Park Stamford, Connecticut (Address of principal executive offices) 06-0619596 (I.R.S. Employer Identification No.) 06905 (Zip Code) Registrant's telephone number, including area code: (203) 614-5600...

  • Page 3
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES TABLE OF CONTENTS Page PART I Item 1. Business ...Item 1A. Risk Factors ...Item 1B. Unresolved Staff Comments ...Item 2. Properties ...Item 3. Legal Proceedings ...Item 4. Submission of Matters to a Vote of Security Holders ...Executive Officers ......

  • Page 4
    ... to pay an annual dividend of $1.00 per common share. Growth During 2006, we added approximately 75,100 new high-speed internet customers and almost 88,200 customers began buying a bundle or package of our services. At December 31, 2006, we had approximately 393,200 high-speed data customers and...

  • Page 5
    ...Our business, under the Frontier name, is primarily with residential customers and, to a lesser extent, non-residential customers. Our Frontier services include access services, local services, long distance services, data and internet services, directory services, television services, and wireless...

  • Page 6
    ...life of the related white or yellow pages book. Television services We offer a television product in partnership with Echostar's DISH Network (DISH). We provide access to all-digital television channels featuring movies, sports, news, music, and high-definition TV programming. We offer packages that...

  • Page 7
    ... economic conditions, changing technology and because some customers disconnect second lines when they add high-speed internet or cable modem service. We lost approximately 111,000 access lines during the year ended December 31, 2006, but added over 75,100 high-speed internet subscribers during this...

  • Page 8
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES Local and Long Distance Services, or CALLS plan, reduced prices for interstate-switched access services and phased out many of the implicit subsidies in interstate access rates. The CALLS program expired in 2005. The FCC may address future changes in ...

  • Page 9
    ... is intense and increasing. We experience competition from many communications service providers including cable operators, wireless carriers, VOIP providers, long distance providers, competitive local exchange carriers, internet providers and other wireline carriers. We believe that competition...

  • Page 10
    ... approximately $5.0 million due to the utilization of existing tax net operating losses on both the federal and state level. SEGMENT INFORMATION With the 2006 sale of our CLEC (ELI), we currently operate in only one reportable segment. FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND...

  • Page 11
    ... dividing lines between long distance, local, wireless, cable and internet services are becoming increasingly blurred. Through mergers and various service expansion strategies, services providers are striving to provide integrated solutions both within and across geographic markets. Our competitors...

  • Page 12
    ... behavior (such as wireless displacement of wireline use, email use, instant messaging and increasing use of VOIP), technology changes and regulatory constraints. These factors are likely to cause our local network service, switched network access, long distance and subsidy revenues to continue to...

  • Page 13
    .... Increasing competition, offering new services, improving the capabilities or reducing the maintenance costs of our plant may cause our capital expenditures to increase in the future. In addition, our ongoing annual dividend of $1.00 per share under our current policy utilizes a significant portion...

  • Page 14
    ... ($165.0 million or 8% in 2006) from federal and state subsidies, including the federal high cost fund, federal local switching support fund, federal USF surcharge and various state funds. FCC and state regulators are currently considering a number of proposals for changing the manner in which...

  • Page 15
    ... at 180 South Clinton Avenue, Rochester, New York 14646. In addition, we lease and own space in our operating markets throughout the United States. Our telephone properties include: connecting lines between customers' premises and the central offices; central office switching equipment; fiber-optic...

  • Page 16
    ... Officer Executive Vice President Senior Vice President, General Counsel and Secretary Executive Vice President Sales, Marketing and Business Development Senior Vice President and Chief Accounting Officer Executive Vice President and Chief Operating Officer Senior Vice President, Human Resources...

  • Page 17
    ... for several companies in the communications industry including ATT, Consolidated Communications and smaller companies in the rural local exchange business. Mr. Shassian is a certified public accountant, and served for 5 years as the Senior Vice President and Chief Financial Officer of Southern...

  • Page 18
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES PRICE RANGE OF COMMON STOCK Our common stock is traded on the New York Stock Exchange under the symbol CZN. The following ...

  • Page 19
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES STOCKHOLDER RETURN PERFORMANCE GRAPH The following performance graph compares the cumulative total return of our common stock to the S&P 500 Stock Index and to the S&P Telecommunications Services Index for the five-year period commencing December 31, ...

  • Page 20
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES ISSUER PURCHASES OF EQUITY SECURITIES (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs Period (a) Total Number ...

  • Page 21
    ... consideration with long-term debt; Changes in the number of our revenue generating units, which consists of access lines plus high-speed internet subscribers; The effects of competition from wireless, other wireline carriers (through VOIP or otherwise), highspeed cable modems and cable telephony...

  • Page 22
    ... networks; The effects of increased medical, retiree and pension expenses and related funding requirements; Changes in income tax rates, tax laws, regulations or rulings, and/or federal or state tax assessments; The effects of state regulatory cash management policies on our ability to transfer...

  • Page 23
    ... one of the largest exchange telephone carriers in the country. We offer our incumbent local exchange carrier (ILEC) services under the "Frontier" name. On July 31, 2006 we sold our competitive local exchange carrier (CLEC), Electric Lightwave, LLC (ELI). We are accounting for ELI as a discontinued...

  • Page 24
    ... expected to be approximately $2.0 million due to the utilization of existing tax net operating losses on both the federal and state level. Sale of Non-Core Operations and Investments During 2006, we sold ELI, our CLEC business (including its associated real estate), for $255.3 million in cash plus...

  • Page 25
    ...to the first quarter debt exchanges, a non-cash pre-tax loss of approximately $2.4 million was recognized in accordance with EITF No. 96-19, "Debtor's Accounting for a Modification or Exchange of Debt Instruments," which is included in other income (loss), net. On June 1, 2006, we retired at par our...

  • Page 26
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES $27.6 million per year. See the discussion below concerning EPPICS conversions for further information regarding the issuance of common stock. We may from time to time repurchase our debt in the open market, through tender offers, exchanges of debt ...

  • Page 27
    ... general corporate purposes but may not be used to fund dividend payments. Covenants The terms and conditions contained in our indentures and credit facilities agreements include the timely payment of principal and interest when due, the maintenance of our corporate existence, keeping proper books...

  • Page 28
    ... and had repurchased a total of 18,775,156 shares of our common stock at an aggregate cost of $250.0 million. Dividends Our ongoing annual dividends of $1.00 per share of common stock under our current policy utilize a significant portion of our cash generated by operations and therefore could limit...

  • Page 29
    ... Committee has reviewed our disclosures relating to them. Telecommunications Bankruptcies Our estimate of anticipated losses related to telecommunications bankruptcies is a "critical accounting estimate." We have significant on-going normal course business relationships with many telecom providers...

  • Page 30
    ... that fair value exceeded book value of goodwill. An independent third party appraiser analyzed trade name. Pension and Other Postretirement Benefits Our estimates of pension expense, other post retirement benefits including retiree medical benefits and related liabilities are "critical accounting...

  • Page 31
    ...rate levels (2006 was close to statutory) as a result of the completion of audits with federal and state taxing authorities and changes in the structure of certain of our subsidiaries. New Accounting Pronouncements Accounting for Defined Benefit Pension and Other Postretirement Plans In October 2006...

  • Page 32
    ... 2006, the FASB issued EITF Issue No. 06-3, "How Taxes Collected from Customers and Remitted to Governmental Authorities Should be Presented in the Income Statement" (EITF No. 06-3), which requires disclosure of the accounting policy for any tax assessed by a governmental authority that is directly...

  • Page 33
    ... OPERATIONS REVENUE Revenue is generated primarily through the provision of local, network access, long distance and data services. Such services are provided under either a monthly recurring fee or based on usage at a tariffed rate and is not dependent upon significant judgments by management, with...

  • Page 34
    ...local rate increase on some of our Rochester residential access lines effective August 2006. 2005 reflected a reserve of $4.0 million associated with a state rate of return limitation on earnings. Enhanced services revenue increased $5.8 million, primarily due to sales of additional feature packages...

  • Page 35
    ... lowering our overall average rate per minute billed. Our long distance revenues may continue to decrease in the future due to lower rates and/or minutes of use. Competing services such as wireless, VOIP and cable telephony are resulting in a loss of customers, minutes of use and further declines in...

  • Page 36
    ... are primarily due to increasing rates and usage. As we continue to increase our sales of data products such as high-speed internet and expand the availability of our unlimited long distance calling plans, our network access expense is likely to increase. Access line losses have offset some of the...

  • Page 37
    ... through the consolidation, including the opening of a new call center in Deland, FL in August 2006, and the closing of call centers in 2007, we expect that our operating expenses will temporarily increase. As noted elsewhere, the introduction of new service offerings may also negatively impact our...

  • Page 38
    ...stock benefits, cash expenses of $19.2 million for advisory fees, $19.3 million for severance and retention arrangements and $15.5 million primarily for tax reimbursements. INVESTMENT AND OTHER INCOME (LOSS), NET / INTEREST EXPENSE / INCOME TAX EXPENSE (BENEFIT) ($ in thousands) Amount 2006 $ Change...

  • Page 39
    ... or 81%, as compared with the prior year primarily due to changes in taxable income. The effective tax rate for 2006 was 35% as compared with an effective tax rate of 29% for 2005. We expect to utilize a substantial amount of tax net operating losses as a result of the sale of ELI and receipt of the...

  • Page 40
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES On July 31, 2006, we sold our CLEC business, Electric Lightwave LLC (ELI) for $255.3 million (including the sale of associated real estate) in cash plus the assumption of approximately $4.0 million in capital lease obligations. We recognized a pre-tax...

  • Page 41
    ... definitive proxy statement for the 2007 Annual Meeting of Stockholders to be filed with the SEC pursuant to Regulation 14A within 120 days after December 31, 2006. See "Executive Officers of the Registrant" in Part I of this Report following Item 4 for information relating to executive officers. 40

  • Page 42
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is incorporated by reference from our definitive proxy statement for the 2007 Annual Meeting of Stockholders to be filed with the SEC pursuant to Regulation 14A within 120 days ...

  • Page 43
    ... quarter ended June 30, 2000).* By-laws of Citizens Communications Company, as amended (filed as Exhibit 99.2 to the Company's Current Report on Form 8-K filed on May 31, 2006).* Rights Agreement, dated as of March 6, 2002, between Citizens Communications Company and Mellon Investor Services, LLC...

  • Page 44
    ... Fee Equity Plan (filed as Exhibit 10.2 to the Company's Current Report on Form 8-K filed on December 20, 2005). * Non-Employee Directors' Equity Incentive Plan (filed as Appendix B to the Company's Proxy Statement dated April 17, 2006). * Separation Agreement between Citizens Communications Company...

  • Page 45
    ... between Citizens Communications Company and Integra Telecom Holdings, Inc. dated February 6, 2006 (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on February 9, 2006). * Stock Redemption Agreement between Citizens Utilities Rural Company, Inc. and The Rural Telephone Bank...

  • Page 46
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES 23.1 31.1 31.2 32.1 32.2 * Auditors' Consent Certification of Principal Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 (the "1934 Act"). Certification of Principal Financial Officer... plans or arrangements. 45

  • Page 47
    ... Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CITIZENS COMMUNICATIONS COMPANY (Registrant) By: /s/ MARY AGNES WILDEROTTER MARY AGNES WILDEROTTER Chairman of the Board, President and Chief Executive Officer...

  • Page 48
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 28th day of February 2007. Signature Title /s/ KATHLEEN...

  • Page 49
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES Index to Consolidated Financial Statements Item Page Reports of Independent Registered Public Accounting Firm ...Management's Report on Internal Control Over Financial Reporting ...Consolidated balance sheets as of December 31, 2006 and 2005 ......

  • Page 50
    ..., "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans" as of December 31, 2006. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Citizens Communications Company and subsidiaries...

  • Page 51
    ... the degree of compliance with the policies or procedures may deteriorate. In our opinion, management's assessment that Citizens Communications Company and subsidiaries maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects...

  • Page 52
    ...then ended. Our management's assessment of the effectiveness of our internal control over financial reporting as of December 31, 2006 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which is included herein. Stamford, Connecticut February 28...

  • Page 53
    ..., plant and equipment, net ...Goodwill, net ...Other intangibles, net ...Investments ...Other assets ...Total assets ...LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Long-term debt due within one year ...Accounts payable ...Advanced billings ...Income taxes accrued ...Other taxes accrued...

  • Page 54
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For The Years Ended December 31, 2006, 2005 and 2004 ($ in thousands, except for per-share amounts) 2006 2005 2004 Revenue ...Operating expenses: Cost of services (exclusive of depreciation and amortization) ......

  • Page 55
    ...) - Net income ...- - - 72,150 Tax benefit on equity forward contracts ...- - - 5,312 Other comprehensive loss, net of tax and reclassifications adjustments ...- - - - Balance December 31, 2004 ...339,635 Stock plans ...2,096 Conversion of EPPICS ...2,225 Dividends on common stock of $1.00 per share...

  • Page 56
    ...: Repayment of customer advances for construction and contributions in aid of construction ...Long-term debt borrowings ...Debt issuance costs ...Long-term debt payments ...Premium to retire debt ...Issuance of common stock ...Shares repurchased ...Dividends paid ...Net cash used by financing...

  • Page 57
    ...," or "our" in this report. We are a communications company providing services to rural areas and small and medium-sized towns and cities as an incumbent local exchange carrier, or ILEC. We offer our ILEC services under the "Frontier" name. (b) Principles of Consolidation and Use of Estimates: Our...

  • Page 58
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements assets and liabilities, including property, plant and equipment, goodwill and other identifiable intangibles. We annually (during the fourth quarter) examine the carrying value of our goodwill and trade name ...

  • Page 59
    ... over operating and financial policies, are accounted for using the equity method of accounting (see Note 9). (j) Income Taxes and Deferred Income Taxes: We file a consolidated federal income tax return. We utilize the asset and liability method of accounting for income taxes. Under the asset and...

  • Page 60
    ... computed using the Black Scholes option-pricing model. Had we determined compensation cost based on the fair value at the grant date for the Management Equity Incentive Plan (MEIP), Equity Incentive Plan (EIP), Employee Stock Purchase Plan (ESPP) and Non-Employee Directors' Deferred Fee Equity Plan...

  • Page 61
    ... COMMUNICATIONS COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements (2) RECENT ACCOUNTING LITERATURE AND CHANGES IN ACCOUNTING PRINCIPLES: Accounting for Defined Benefit Pension and Other Postretirement Plans In October 2006, the FASB issued SFAS No. 158, "Employers' Accounting...

  • Page 62
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements Exchanges of Productive Assets In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets," an amendment of APB Opinion No. 29. SFAS No. 153 addresses the measurement of exchanges of ...

  • Page 63
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements Accounting for Endorsement Split-Dollar Life Insurance Arrangements In September 2006, the FASB reached consensus on the guidance provided by EITF No. 06-4, Accounting for Deferred Compensation and ...

  • Page 64
    ... of property, plant and equipment at December 31, 2006 and 2005 are as follows: ($ in thousands) Estimated Useful Lives 2006 2005 Land ...N/A Buildings and leasehold improvements ...41 years General support ...5 to 17 years Central office/electronic circuit equipment ...5 to 11 years Cable and wire...

  • Page 65
    ... has changed its accounting policies associated with the accrual of utilities and vacation expense. Historically, the Company's practice was to expense utility and vacation costs in the period these items were paid, which generally resulted in a full year of utilities and vacation expense in the...

  • Page 66
    ...108 in the fourth quarter of 2006, this error was corrected as of January 1, 2006 through a decrease in other long-term liabilities and an increase in retained earnings. Purchase Accounting. During the period 1991 to 2001 Citizens acquired a number of telecommunications businesses, growing its asset...

  • Page 67
    ..."origination" of certain calls carried by AT&T Corp. and AT&T Communications, Inc. (collectively, "AT&T") and terminated on our networks. In January 2006, we filed a complaint against AT&T in the United States District Court for the District of New Jersey with respect to this dispute (which case was...

  • Page 68
    ... definitive agreement to sell Conference-Call USA, LLC (CCUSA), our conferencing services business. On March 15, 2005, we completed the sale for $43,565,000 in cash. The pre-tax gain on the sale of CCUSA was $14,061,000. Our after-tax gain was approximately $1,167,000. The book income taxes recorded...

  • Page 69
    ... other comprehensive income (loss). Unrealized holding gains at December 31, 2006 and 2005 were $30,000 and $122,000 respectively which approximates the fair market value. During 2004, we sold our investments in D & E Communications, Inc. (D & E) and Hungarian Telephone and Cable Corp. (HTCC) for...

  • Page 70
    ... in our long-term debt from December 31, 2005 to December 31, 2006 is summarized as follows: Twelve Months Ended Interest Rate* at December 31, December 31, 2006 2006 ($ in thousands) December 31, 2005 Payments New Interest Borrowings Rate Swap Other Rural Utilities Service Loan Contracts...

  • Page 71
    ...to the first quarter debt exchanges, a non-cash pre-tax loss of approximately $2.4 million was recognized in accordance with EITF No. 96-19, "Debtor's Accounting for a Modification or Exchange of Debt Instruments," which is included in other income (loss), net. On June 1, 2006, we retired at par our...

  • Page 72
    ... facility is available for general corporate purposes but may not be used to fund dividend payments. For the year ended December 31, 2005, we retired an aggregate principal amount of $36.4 million of debt, including $30.0 million of 5% Company Obligated Mandatorily Redeemable Convertible Preferred...

  • Page 73
    ... payments under the terms of the contracts. The interest rate swap contracts are reflected at fair value in our consolidated balance sheets and the related portion of fixed-rate debt being hedged is reflected at an amount equal to the sum of its book value and an amount representing the change...

  • Page 74
    ...with the Bangor, Maine legal matter. In connection with our exchange of debt during the first quarter of 2006 and second quarter of 2005, we recognized a non-cash, pre-tax loss. 2006 and 2005 also include a gain for the changes in fair value of our forward rate agreements. During 2006, 2005 and 2004...

  • Page 75
    ...stock. The conversion price was reduced from $13.30 to $11.46 during the third quarter of 2004 as a result of the $2.00 per share of common stock special, non-recurring dividend. The proceeds from the issuance of the Trust Convertible Preferred Securities and a Company capital contribution were used...

  • Page 76
    ... awards to key employees in the form of our common stock. The number of shares issued as restricted stock awards during 2006, 2005 and 2004 were 732,000, 352,000 and 2,172,000, respectively. None of the restricted stock awards may be sold, assigned, pledged or otherwise transferred, voluntarily or...

  • Page 77
    ...-23, "Issues Related to the Accounting for Stock Compensation under APB No. 25 and FIN No. 44," there is no accounting consequence for changes made to the exercise price and the number of shares of a fixed stock option or award as a direct result of the special, non-recurring dividend. The following...

  • Page 78
    ...6 years The following summary presents information regarding unvested restricted stock and changes with regard to restricted stock under the MEIP and the EIPs: Number of Shares Weighted Average Grant Date Fair Value Aggregate Fair Value at December 31, 2006 Balance at January 1, 2004 ...Restricted...

  • Page 79
    ... Plan. For 2006, each non-employee director had to elect, by December 31 of the preceding year, to receive $40,000 cash or 5,760 stock units as an annual retainer. Directors making a stock unit election must also elect to convert the units to either common stock (convertible on a one-to-one basis...

  • Page 80
    ... the fair market value of our common stock on the grant date under APB No. 25 and related interpretations. We had also maintained a Non-Employee Directors' Retirement Plan providing for the payment of specified sums annually to our non-employee directors, or their designated beneficiaries, starting...

  • Page 81
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements The components of the net deferred income tax liability (asset) at December 31 are as follows: ($ in thousands) 2006 2005 Deferred income tax liabilities: Property, plant and equipment basis differences ......

  • Page 82
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements The provision (benefit) for federal and state income taxes, as well as the taxes charged or credited to shareholders' equity, includes amounts both payable currently and deferred for payment in future periods...

  • Page 83
    ...00-23, "Issues Related to the Accounting for Stock Compensation under APB No. 25 and FIN No. 44," there is no accounting consequence for changes made to the exercise price and the number of shares of a fixed stock option or award as a direct result of the special, non-recurring dividend. In addition...

  • Page 84
    ... our Directors' Deferred Fee Equity Plan and Non-Employee Directors' Retirement Plan. These securities have not been included in the diluted income per share calculation because their inclusion would have had an antidilutive effect. (21) COMPREHENSIVE INCOME (LOSS): Comprehensive income consists...

  • Page 85
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements Our other comprehensive income (loss) for the years ended December 31, 2006, 2005 and 2004 is as follows: ($ in thousands) Before-Tax Amount 2006 Tax Expense/ (Benefit) Net-of-Tax Amount Net unrealized ...

  • Page 86
    ... date used in the selection of our discount rate is the balance sheet date. Our discount rate assumption is determined annually with assistance from our actuaries based on the pattern of expected future benefit payments and the prevailing rates available on long-term, high quality corporate bonds...

  • Page 87
    ...55% in equity securities and 5% to 15% in alternative investments. We review our asset allocation at least annually and make changes when considered appropriate. In 2006, we did not change our expected long-term rate of return from the 8.25% used in 2005. Our pension plan assets are valued at actual...

  • Page 88
    ... of year ...Service cost ...Interest cost ...Actuarial (gain) loss ...Benefits paid ...Special termination benefits and other of (116) ...Projected benefit obligation at end of year ...Change in plan assets Fair value of plan assets at beginning of year ...Actual return on plan assets ...Employer...

  • Page 89
    ... year-end obligations were as follows: 2006 2005 Discount rate-used at year end to value obligation ...Discount rate-used to compute annual cost ...Expected long-term rate of return on plan assets ...Rate of increase in compensation levels ...Postretirement Benefits Other Than Pensions-"OPEB" 6.00...

  • Page 90
    ... Discount rate-used at year end to value obligation ...Discount rate-used to compute annual cost ...Expected long-term rate of return on plan assets ...($ in thousands) 2006 6.00% 5.625% 5.625% 6.00% 8.25% 8.25% 2005 Change in benefit obligation Benefit obligation at beginning of year ...Service...

  • Page 91
    ...: 2006 2005 Asset category: Equity securities ...Debt securities ...Cash and other ...Total ...The plan's expected benefit payments by year are as follows: Year ($ in thousands) Gross Benefits 0% 100% 0% 100% 0% 100% 0% 100% Medicare D Subsidy Total 2007 ...2008 ...2009 ...2010 ...2011 ...2012...

  • Page 92
    ... results nor the financial condition of the Company. Subsequent to the June 27, 2006 judgment, we began settlement discussions with the City, with participation from the State of Maine. In January 2007, we reached an agreement in principle to settle the matter for a payment by us of $7,625,000. The...

  • Page 93
    ...of our subsidiaries, Frontier Subsidiary Telco, Inc., received a "Notice of Indemnity Claim" from Citibank, N.A., that is related to a complaint pending against Citibank and others in the U.S. Bankruptcy Court for the Southern District of New York as part of the Global Crossing bankruptcy proceeding...

  • Page 94
    ... future payments for obligations under our noncancelable long distance contracts and service agreements are as follows: Year ($ in thousands) 2007 ...2008 ...2009 ...2010 ...2011 ...Thereafter ...Total ... $ 26,449 18,899 16,610 7,382 165 660 $ 70,165 We sold all of our utility businesses as...

  • Page 95
    ... Wireless) ...CNA ...State of New York ...ELI projects ...Total ... $ 375 19,404 2,993 50 $ 22,822 CNA serves as our agent with respect to general liability claims (auto, workers compensation and other insured perils of the Company). As our agent, they administer all claims and make payments...

  • Page 96
    ... AGENT Illinois Stock Transfer Company 209 West Jackson Boulevard, Suite 903 Chicago, IL 60606-6905 Tel: 800-757-5755 or 312-427-2953 Fax: 312-427-2879 AUDITORS KPMG LLP 3001 Summer Street Stamford, CT 06905 The common stock is listed on the New York Stock Exchange and trades under the symbol...

  • Page 97
    OUR MISSION To be the leader in providing Communications services to residential and business customers in our markets OUR VALUES Put the customer first Treat one another with respect Keep our commitments; be accountable Be ethical in all of our dealings Take the initiative Be team players Be ...

  • Page 98
    Citizens Communications Company Three High Ridge Park Stamford, CT 06905-1390 203-614-5600