Frontier Communications 2007 Annual Report Download - page 26

CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
second quarter of 2006, as reflected in investment income in the consolidated statements of operations for the
year ended December 31, 2006. Our tax net operating losses were used to absorb the cash liability for taxes.
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 the assumption of approximately $4.0 million in capital lease obligations.
During 2005, we executed a strategy of divesting non-core assets, which resulted in the following
transactions:
On February 1, 2005, we sold 20,672 shares of Prudential Financial, Inc. for approximately $1.1 million.
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
surrender value of the policies purchased by Dr. Tow totaled approximately $24.2 million, and we recognized a
gain of approximately $457,000 that is included in other income (loss), net.
During 2005, we sold 79,828 shares of Global Crossing Limited for $1.1 million.
Capital Expenditures
For the year ended December 31, 2007, our capital expenditures were $315.8 million, including $34.3
million related to the Commonwealth and GVN properties since date of acquisition. We continue to closely
scrutinize all of our capital projects, emphasize return on investment and focus our capital expenditures on areas
and services that have the greatest opportunities with respect to revenue growth and cost reduction. We anticipate
capital expenditures of approximately $300.0 million to $310.0 million for 2008.
CASH FLOW USED BY FINANCING ACTIVITIES
Debt Reduction and Debt Exchanges
For the year ended December 31, 2007, we retired an aggregate principal amount of $967.2 million of debt,
including $3.3 million of 5% Company Obligated Mandatorily Redeemable Convertible Preferred Securities
(EPPICS), and $17.8 million of 3.25% Commonwealth convertible notes that were converted into our common
stock. On April 26, 2007, we redeemed $495.2 million principal amount of our 7.625% Senior Notes due 2008 at
a price of 103.041% plus accrued and unpaid interest. During the first quarter of 2007, we temporarily borrowed
and repaid $200.0 million utilized to temporarily fund the acquisition of Commonwealth, and we paid down the
$35.0 million Commonwealth credit facility. Through December 31, 2007, we retired $183.3 million face amount
of Commonwealth convertible notes for which we paid $165.4 million in cash and $36.7 million in common
stock (premium paid of $18.9 million was recorded as $17.8 million to goodwill and $1.1 million to other income
(loss), net), resulting in a remaining outstanding balance of $8.5 million as of December 31, 2007. We also paid
down $44.6 million of industrial development revenue bonds and $4.3 million of rural utilities service loan
contracts.
For the year ended December 31, 2006, we retired an aggregate principal amount of $251.0 million of debt,
including $15.9 million of EPPICS that were converted into our common stock. During the first quarter of 2006,
we entered into two debt-for-debt exchanges of our debt securities. As a result, $47.5 million of our 7.625%
notes due 2008 were exchanged for approximately $47.4 million of our 9.00% notes due 2031. During the fourth
quarter of 2006, we entered into four debt-for-debt exchanges and exchanged $157.3 million of our 7.625% notes
due 2008 for $149.9 million of our 9.00% notes due 2031. The 9.00% notes are callable on the same general
terms and conditions as the 7.625% notes exchanged. No cash was exchanged in these transactions. However,
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