Frontier Communications 2007 Annual Report Download

Download and view the complete annual report

Please find the complete 2007 Frontier Communications annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 100

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100

CITIZENS COMMUNICATIONS COMPANY
2007 ANNUAL REPORT
SM

Table of contents

  • Page 1
    CITIZENS COMMUNICATIONS COMPANY 2007 ANNUAL REPORT SM

  • Page 2

  • Page 3
    ... name of registrant as specified in 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...

  • Page 4
    ... Officers and Corporate Governance ...Item 11. Executive Compensation ...Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...Item 13. Certain Relationships and Related Transactions, and Director Independence ...Item 14. Principal Accountant Fees...

  • Page 5
    ... to pay an annual dividend of $1.00 per common share. Growth During 2007, we added approximately 130,700 new high-speed internet customers and almost 116,100 customers began buying a bundle or package of our services. At December 31, 2007, we had approximately 523,800 high-speed data customers and...

  • Page 6
    ... are provided. We also offer packages of communications services. These packages permit customers to bundle their basic telephone line with their choice of enhanced, long distance, television and internet services for a monthly fee and/or usage fee depending on the plan. We intend to continue...

  • Page 7
    ...or yellow pages book, which is typically one calendar year. Television services We offer a television product in partnership with Echostar's DISH Network. We provide access to all-digital television channels featuring movies, sports, news, music, and high-definition TV programming. We offer packages...

  • Page 8
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES The following table sets forth the number of our access lines and high-speed internet subscribers as of December 31, 2007 and 2006. Access Lines and High-Speed Internet Subscribers at December 31, 2007 2006 State New York ...Pennsylvania ......

  • Page 9
    ... Affordable 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 interstate access charges during 2008...

  • Page 10
    ... net neutrality and the application of the FCC's Internet Policy Statement. It is uncertain whether these petitions will result in any formal FCC action. Some state regulators (including New York and Illinois) have in the past considered imposing on regulated companies (including us) cash management...

  • Page 11
    ...Internet site (www.sec.gov) that contains reports, proxy and information statements and other information regarding the Company and other issuers that file electronically. Material filed by us can also be inspected at the offices of the New York Stock Exchange, Inc. (NYSE), 20 Broad Street, New York...

  • Page 12
    ... Manual. In addition, the certifications of our Chief Executive Officer and Chief Financial Officer required under Section 302 of the Sarbanes-Oxley Act of 2002 are included as exhibits to this Form 10-K. We make available, free of charge on our website, our Annual Report on Form 10-K, Quarterly...

  • Page 13
    ... lines, switched access minutes of use, long distance prices, Federal and state subsidies and related revenues because of economic conditions, increasing competition, changing consumer behavior (such as wireless displacement of wireline use, email use, instant messaging and increasing use of VOIP...

  • Page 14
    .... 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 15
    ... state subsidies, including the federal high cost fund, federal local switching support fund, federal universal service fund surcharge and various state funds. FCC and state regulators are currently considering a number of proposals for changing the manner in which eligibility for federal subsidies...

  • Page 16
    ... at 180 South Clinton Avenue, Rochester, New York 14646 and at 100 CTE Drive, Dallas, Pennsylvania 18612. Call center support offices are currently located in leased premises at 14450 Burnhaven Drive, Burnsville, Minnesota 55306 and 1398 South Woodland Blvd., DeLand, Florida 32720. In addition...

  • Page 17
    ... ...Hilary E. Glassman ...Peter B. Hayes ...Robert J. Larson ...Daniel J. McCarthy ...Cecilia K. McKenney ...Melinda White ... 53 52 45 50 48 43 45 48 Chairman of the Board, President and Chief Executive Officer Chief Financial Officer Senior Vice President, General Counsel and Secretary Executive...

  • Page 18
    ... Headquarters Human Resources from 2000 to 2004. MELINDA WHITE has been with Citizens since January 2005. She is currently Senior Vice President and General Manager of New Business Operations. Previously, she was Senior Vice President, Commercial Sales and Marketing from January 2006 to October 2007...

  • Page 19
    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 20
    ...the acquisition of CTE, were inadvertently permitted to purchase in the open market approximately 149,000 shares of the Company's common stock that were not registered for purchase by the CTE 401(k) Plan utilizing a Registration Statement on Form S-8 under the Securities Act of 1933. All such shares...

  • Page 21
    ... (under the terms of grants under employee stock compensation plans) to offset minimum tax withholding obligations that occur upon the vesting of restricted shares. The Company's stock compensation plans provide that the value of shares withheld shall be the average of the high and low price of the...

  • Page 22
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES ITEM 6. SELECTED FINANCIAL DATA The following tables present selected historical consolidated financial information of Citizens for the periods indicated. The selected historical consolidated financial information of Citizens as of and for each of the...

  • Page 23
    ...services, switched access services and subsidies; Changes in accounting policies or practices adopted voluntarily or as required by generally accepted accounting principles or regulators; The effects of ongoing changes in the regulation of the communications industry as a result of federal and state...

  • Page 24
    ... and 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 accounted for ELI as a discontinued...

  • Page 25
    ..., make required debt payments through 2008, pay taxes, pay dividends to our stockholders in accordance with our dividend policy and support our short-term and long-term operating strategies. However, a number of factors, including but not limited to, increased cash taxes, losses of access lines...

  • Page 26
    .... On March 15, 2005, we completed the sale of Conference Call USA, LLC for $43.6 million. In June 2005, we sold for cash our interests in certain key man life insurance policies on the lives of Leonard Tow, our former Chairman and Chief Executive Officer, and his wife, a former director. The cash...

  • Page 27
    ... Proceeds from the sale were used to partially finance our acquisition of Commonwealth. In December 2006, we borrowed $150.0 million under a senior unsecured term loan agreement. The loan matures in 2012 and bears interest based on an average prime rate or London Interbank Offered Rate, or LIBOR, at...

  • Page 28
    ..., 2007. The expiration date for this $250.0 million five year revolving credit agreement is May 18, 2012. During the term of the credit facility we may borrow, repay and reborrow funds. The credit facility is available for general corporate purposes but may not be used to fund dividend payments. 24

  • Page 29
    ... The terms and conditions contained in our indentures and credit facility agreements include the timely payment of principal and interest when due, the maintenance of our corporate existence, keeping proper books and records in accordance with United States Generally Accepted Accounting Principles...

  • Page 30
    ... utilization of existing tax net operating losses on both the Federal and state level. On March 15, 2005, we completed the sale of Conference Call USA, LLC (CCUSA) for $43.6 million in cash. The pre-tax gain on the sale of CCUSA was $14.1 million. Our after-tax gain was $1.2 million. The book income...

  • Page 31
    ... common stock. Additionally, we utilized a range of prices to gauge sensitivity. Our test determined that fair value exceeded book value of goodwill. Pension and Other Postretirement Benefits Our estimates of pension expense, other post retirement benefits including retiree medical benefits and...

  • Page 32
    ... rates, expected retirement age, optional form of benefit and mortality. We review these assumptions for changes annually with our independent actuaries. We consider our discount rate and expected long-term rate of return on plan assets to be our most critical assumptions. The discount rate is used...

  • Page 33
    ... to income tax examinations generally for the years 2003 forward for both our Federal and state filing jurisdictions. We maintain uncertain tax positions in various state jurisdictions. It is reasonably possible that amounts related to previous asset dispositions and tax credits will change within...

  • Page 34
    ... access lines and 4,200 high-speed internet subscribers as of December 31, 2007. The loss of access lines during 2007 was primarily among residential customers. The non-residential line losses were principally in our central and eastern regions and Rochester, New York, while the residential losses...

  • Page 35
    ... as compared with the prior year. The loss of access lines accounted for $28.7 million of the decline in local revenue, partially offset by rate increases in Rochester, New York on residential lines that became effective August of 2006 and 2007. Local services revenue for the year ended December 31...

  • Page 36
    ...rate per minute. Our long distance minutes of use increased during 2006. During 2007, we actively marketed a package of unlimited long distance minutes with our digital phone and state unlimited bundled service offerings. The sale of our digital phone and state unlimited products, and its associated...

  • Page 37
    ... AND OPERATING DATA As Reported As of December 31, 2007 Citizens (excluding As of Acquisitions CTE and GVN) % Change December 31, 2006 % Change 2005 Access lines ...2,431,676 High-speed internet (HSI) subscribers ...523,845 Video subscribers . . 93,596 Long distance subscribers ...1,569,620 435...

  • Page 38
    ... high-speed internet and expand the availability of our unlimited long distance calling plans, our network access expense is likely to continue to increase. A decline in expenses associated with access line losses, has offset some of the increase. OTHER OPERATING EXPENSES 2007 2006 2005 As Citizens...

  • Page 39
    ... savings by leveraging our centralized back office, customer service and administrative support functions over a larger customer base. Additionally, our USF contribution rate and PUC fees decreased from the prior year period, resulting in a reduction in costs of $13.1 million in 2007. An increase in...

  • Page 40
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES DEPRECIATION AND AMORTIZATION EXPENSE 2007 2006 2005 Citizens (excluding As CTE and Reported Acquisitions GVN) $ Change % Change Amount $ Change % Change Amount ($ in thousands) Depreciation expense ...$374,435 Amortization expense ...171,421 $545,...

  • Page 41
    ... tax rate of 34.9% for 2006. The Company's overall effective tax rate increased in 2007 mainly due to changes in permanent difference items and tax contingencies. We paid $54.4 million in cash taxes during 2007, an increase of $49.0 million over 2006, reflecting the utilization of our tax loss...

  • Page 42
    ... interest rate swap agreements. Under the terms of the agreements, which qualify for hedge accounting, we made semi-annual, floating interest rate payments based on six month LIBOR and received a fixed rate on the notional amount. The underlying variable rate for these interest rate swaps is set in...

  • Page 43
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES On January 15, 2008, we terminated all of our interest rate swap agreements representing $400.0 million notional amount of indebtedness associated with our Senior Notes due in 2011 and 2013. We received cash proceeds on the swap terminations of ...

  • Page 44
    ...after December 31, 2007. See "Executive Officers of the Registrant" in Part I of this Report following Item 4 for information relating to executive officers. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is incorporated by reference from our definitive proxy statement for the...

  • Page 45
    ... 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 46
    ... 1991 Indenture, dated as of June 1, 1996, between Citizens Communications Company (f/k/a Citizens Utilities Company) and JPMorgan Chase Bank, N.A. (as successor to Chemical Bank), as Trustee (filed as Exhibit 4.100.11 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996...

  • Page 47
    ... between Citizens Communications Company and The Bank of New York with respect to the 7.125% Senior Notes due 2019 (including the form of such note attached thereto) (filed as Exhibit 4.2 to the March 27, 2007 8-K).* Loan Agreement between Citizens Communications Company and Rural Telephone Finance...

  • Page 48
    ... Report on Form 10-Q for the fiscal quarter ended March 31, 2006).* Separation Agreement between Citizens Communications Company and John H. Casey III dated November 15, 2007. Form of arrangement with named executive officers (other than CEO) with respect to vesting of restricted stock upon a change...

  • Page 49
    ... 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 50
    .../s/ MARY AGNES WILDEROTTER (MARY AGNES WILDEROTTER) Director Director Director Director Director Director Director Senior Vice President and Chief Accounting Officer Director Director Chief Financial Officer Director Director Director Chairman of the Board, President and Chief Executive Officer 46

  • Page 51
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES Index to Consolidated Financial Statements Item Page Management's Report on Internal Control Over Financial Reporting ...Reports of Independent Registered Public Accounting Firm ...Consolidated Balance Sheets as of December 31, 2007 and 2006 ......

  • Page 52
    ... The Board of Directors and Shareholders Citizens Communications Company: The management of Citizens Communications Company and subsidiaries is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and...

  • Page 53
    ... 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), Citizens Communications Company's internal control over financial reporting as of December 31, 2007...

  • Page 54
    ...standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Citizens Communications Company and subsidiaries as of December 31, 2007 and 2006, and the related consolidated statements of operations, shareholders' equity, comprehensive income and cash...

  • Page 55
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 2007 and 2006 ($ in thousands) 2007 2006 ASSETS Current assets: Cash and cash equivalents ...Accounts receivable, less allowances of $32,748 and $108,537, respectively ...Prepaid expenses ...Other current ...

  • Page 56
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For The Years Ended December 31, 2007, 2006 And 2005 ($ in thousands, except for per-share amounts) 2007 2006 2005 Revenue ...Operating expenses: Network access expenses ...Other operating expenses ......

  • Page 57
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 and 2005 (dollars and shares in thousands, except for per-share amounts) Accumulated Other Additional Retained Total Treasury Stock Paid-In Earnings ...

  • Page 58
    ... of customer advances for construction and contributions in aid of construction ...Long-term debt borrowings ...Debt issuance costs ...Long-term debt payments ...Premium paid to retire debt ...Issuance of common stock ...Common stock repurchased ...Dividends paid ...Net cash used by financing...

  • Page 59
    ... local exchange carrier, or ILEC. We offer our ILEC services under the "Frontier" name. (b) Basis of Presentation and Use of Estimates: Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP...

  • Page 60
    ...intangibles. We annually (during the fourth quarter) examine the carrying value of our goodwill and trade name to determine whether there are any impairment losses and have determined for the year ended December 31, 2007 that there was no impairment. Statement of Financial Accounting Standards (SFAS...

  • Page 61
    ... 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 62
    ... 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 63
    ... to income tax examinations generally for the years 2003 forward for both our Federal and state filing jurisdictions. We maintain uncertain tax positions in various state jurisdictions. It is reasonably possible that amounts related to previous asset dispositions and tax credits will change within...

  • Page 64
    ...-4, "Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements." The guidance is applicable to endorsement split-dollar life insurance arrangements, whereby the employer owns and controls the insurance policy, that are associated...

  • Page 65
    ... income (loss), net. We entered into an agreement on July 5, 2007 with Country Road Communications LLC ("Country Road") to acquire Global Valley Networks, Inc. ("GVN") and GVN Services ("GVS") through the purchase from Country Road of 100% of the outstanding common stock of Evans Telephone Holdings...

  • Page 66
    ... ...Goodwill ...Other intangibles ...Other assets ...Current portion of debt ...Accounts payable and other current liabilities ...Deferred income taxes ...Convertible notes ...Other liabilities ...Total Purchase Price ...(1) $ 190,106 387,343 690,035 273,800 11,234 (35,000) (81,767) (143,472) (209...

  • Page 67
    ...and 2006 are as follows: ($ in thousands) Estimated Useful Lives 2007 2006 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 ...15 to 60 years Other ...20 to 30 years Construction...

  • Page 68
    .... The Company 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...

  • Page 69
    ... payment obligation for two former executives of the Company. The liability should have been established in 1999 at the time the two employees elected to exchange their death benefit rights for an annuity payout in accordance with the terms of their respective split dollar life insurance agreements...

  • Page 70
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements (6) ACCOUNTS RECEIVABLE: The components of accounts receivable at December 31, 2007 and 2006 are as follows: ($ in thousands) 2007 2006 End user ...Other ...Less: Allowance for doubtful accounts ...Accounts ...

  • Page 71
    ...$115.0 million in 2009, and $57.4 million annually thereafter through 2012. (8) DISCONTINUED OPERATIONS: (a) Electric Lightwave 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...

  • Page 72
    ... and distributes classified telephone directories in the Commonwealth service territory; (2) a 16.8% interest in the Fairmount Cellular Limited Partnership which is engaged in cellular mobile telephone service in the Rural Service Area (RSA) designated by the FCC as Georgia RSA No. 3; and...

  • Page 73
    ... premiums or discounts. The interest rate for Rural Utilities Service Loan Contracts, Senior Unsecured Debt, and Industrial Development Revenue Bonds represent a weighted average of multiple issuances. Additional information regarding our Senior Unsecured Debt at December 31: 2007 ($ in thousands...

  • Page 74
    ... 31, 2007. The expiration date for this $250.0 million five year revolving credit agreement is May 18, 2012. During the term of the credit facility we may borrow, repay and reborrow funds. The credit facility is available for general corporate purposes but may not be used to fund dividend payments...

  • Page 75
    .... Proceeds from the sale were used to partially finance the Commonwealth acquisition. In December 2006, we borrowed $150.0 million under a senior unsecured term loan agreement. The loan matures in 2012 and bears interest based on an average prime rate or London Interbank Offered Rate or LIBOR plus...

  • Page 76
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements (12) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES: Interest rate swap agreements were used to hedge a portion of our debt that is subject to fixed interest rates. Under our interest rate swap agreements, we ...

  • Page 77
    ... forward rate agreements ...- 430 1,851 Other, net ...2,422 2,471 8,399 Total other income (loss), net ...$(17,833) $ 3,007 $ 756 During the first quarter of 2007, we incurred $4.1 million of fees associated with a bridge loan facility. In 2007, we retired certain debt and recognized a pre-tax loss...

  • Page 78
    ... 5,242,717 shares available for grant. No further awards may be granted under the MEIP, the 1996 EIP and the Deferred Fee Plan. In connection with the Director Plans, compensation costs associated with the issuance of stock units was $1.6 million, $2.0 million and $1.1 million in 2007, 2006 and 2005...

  • Page 79
    ... of time (generally four years). Under the terms of the MEIP, subsequent stock dividends and stock splits have the effect of increasing the option shares outstanding, which correspondingly decreases the average exercise price of outstanding options. 1996 and 2000 Equity Incentive Plans Since the...

  • Page 80
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements The following summary presents information regarding outstanding stock options and changes with regard to options under the MEIP and EIP plans: Shares Subject to Option Weighted Average Option Price Per Share...

  • Page 81
    ... grant is estimated based on the average of the high and low market price of a share of our common stock on the date of grant. Total remaining unrecognized compensation cost associated with unvested restricted stock awards at December 31, 2007 was $12.7 million and the weighted average period over...

  • Page 82
    ...-to-one basis) or cash upon retirement or death. The number of shares of common stock authorized for issuance under the Directors' Equity Plan is 2,540,761, which includes 540,761 shares that were available for grant under the Deferred Fee Plan on the effective date of the Directors' Equity Plan. In...

  • Page 83
    ...Plan. As of December 31, 2007, the liability for such payments was reduced to $0 as the obligation was fully settled during the second quarter of 2007. (18) INCOME TAXES: The following is a reconciliation of the provision for income taxes for continuing operations computed at Federal statutory rates...

  • Page 84
    ... credit as of December 31, 2007 can be carried forward indefinitely to reduce future regular tax liability. 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...

  • Page 85
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements The following table sets forth the changes in the Company's balance of unrecognized tax benefits for the year in accordance with FIN No. 48: ($ in thousands) 2007 Unrecognized tax benefits - beginning of ...

  • Page 86
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements In addition, for the years ended December 31, 2007, 2006 and 2005, restricted stock awards of 1,209,000, 1,174,000 and 1,456,000 shares, respectively, are excluded from our basic weighted average shares ...

  • Page 87
    ...Other comprehensive (loss) ...(21) SEGMENT INFORMATION: $ (1,055) (36,416) (537) $ (38,008) $ (395) (13,933) (7) $ (660) (22,483) (530) $(14,335) $ (23,673) We operate in one reportable segment, Frontier. Frontier provides both regulated and unregulated communications services to residential...

  • Page 88
    ... rates, expected retirement age, optional form of benefit and mortality. We review these assumptions for changes annually with our independent actuaries. We consider our discount rate and expected long-term rate of return on plan assets to be our most critical assumptions. The discount rate is used...

  • Page 89
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements available on long-term, high quality corporate bonds that approximate the benefit obligation. In making this determination we consider, among other things, the yields on the Citigroup Pension Discount Curve ...

  • Page 90
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements Pension Benefits The following tables set forth the plan's projected benefit obligations and fair values of plan assets as of December 31, 2007 and 2006 and net periodic benefit cost for the years ended ...

  • Page 91
    ... of the year-end obligations were as follows: 2007 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 ... 6.50% 6.00% 5.625% 6.00% 5.625% 6.00% 8.25...

  • Page 92
    ...2007 2006 Change in benefit obligation Benefit obligation at beginning of year ...Commonwealth plan as of date of acquisition ...Service cost ...Interest cost ...Plan participants' contributions ...Actuarial loss ...Benefits paid ...Plan change ...Benefit obligation at end of year ...Change in plan...

  • Page 93
    ...costs and valuation of the year-end OPEB obligations were as follows: 2007 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 ... 6.50% 6.00% 6.00% 6.00% 5.625% 8.25% 5.625% 6.00% 8.25% The...

  • Page 94
    ... alleges that, by operating automated telephone systems, including customer service systems, that allow our customers to utilize telephone calling cards, order internet, DSL, and dial-up services, and perform a variety of account related tasks such as billing and payments, we have infringed thirteen...

  • Page 95
    ... telephone companies. The complaint against Citibank, for which it seeks indemnification, alleges that the seller improperly used a portion of the proceeds from the Frontier transaction to pay off the Citibank credit agreement, thereby defrauding certain debt holders of Global Crossing North America...

  • Page 96
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements At December 31, 2007, the estimated future payments for obligations under our noncancelable long distance contracts and service agreements are as follows: ($ in thousands) Year Amount 2008 ...2009 ...2010 ...

  • Page 97
    CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements 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 for claims on ...

  • Page 98
    CORPORATE HEADQUARTERS Three High Ridge Park Stamford, CT 06905-1390 Tel: 203-614-5600 STOCKHOLDER INQUIRIES Investor material is available on Citizen's website at www.czn.com. Copies of the company's 2007 Form 10-K report filed with the U.S. Securities and Exchange Commission and other information ...

  • Page 99
    ...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 innovative; Practice continuous improvement Be active in our communities Do it right the first time Use resources wisely Have...

  • Page 100
    Citizens Communications Company Three High Ridge Park Stamford, CT 06905-1390 203-614-5600