Frontier Communications 2006 Annual Report Download - page 80

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CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
We account for the Deferred Fee Plan and Directors’ Equity Plan in accordance with SFAS No. 123R. To
the extent directors elect to receive the distribution of their stock unit account in cash, they are considered
liability-based awards. To the extent directors elect to receive the distribution of their stock unit accounts in
common stock, they are considered equity-based awards. Compensation expense for stock units that are
considered equity-based awards is based on the market value of our common stock at the date of grant.
Compensation expense for stock units that are considered liability-based awards is based on the market value of
our common stock at the end of each period. For awards granted prior to 1999, a director could elect to be paid in
stock options. Generally, compensation cost was not recorded because the options were granted at 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 at the director’s
retirement, death or termination of directorship. In 1999, we terminated this Plan. The vested benefit of each
non-employee director, as of May 31, 1999, was credited to the director’s account in the form of stock units.
Such benefit will be payable to each director upon retirement, death or termination of directorship. Each
participant had until July 15, 1999 to elect whether the value of the stock units awarded would be payable in our
common stock (convertible on a one-for-one basis) or in cash. As of December 31, 2006, the liability for such
payments was $686,000 all of which will be payable in stock (based on the July 15, 1999 stock price).
(18) RESTRUCTURING AND OTHER EXPENSES:
2006, 2005 and 2004
During 2006, 2005 and 2004, we did not recognize any restructuring and other expenses. We continue to
review our operations, personnel and facilities to achieve greater efficiency.
(19) INCOME TAXES:
The following is a reconciliation of the provision for income taxes for continuing operations computed at
federal statutory rates to the effective rates for the years ended December 31, 2006, 2005 and 2004:
2006 2005 2004
Consolidated tax provision at federal statutory rate ......................... 35.0 % 35.0 % 35.0 %
State income tax provisions, net of federal income tax benefit ................ 2.1% 1.6% 1.4%
Tax reserve adjustment ............................................... 0.2% (8.2)% (22.5)%
All other, net ....................................................... (2.4)% 0.2 % (7.0)%
34.9 % 28.6 % 6.9 %
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