Frontier Communications 2007 Annual Report Download - page 38

CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
Network Access
Consolidated network access expenses for the year ended December 31, 2007 increased $57.0 million, or
33%, to $228.2 million as compared to the prior year ($35.8 million of which was attributable to our 2007
acquisitions). Excluding the additional network access expenses due to the 2007 acquisitions of CTE and GVN,
network access expenses for the years ended December 31, 2007 and 2006 increased $21.2 million and $14.4
million, or 12% and 9%, respectively, as compared with the prior year. The increases in network costs for 2007
and 2006, are primarily due to increasing rates and usage related to our long distance product and our data
backbone. Additionally, in the fourth quarters of 2007 and 2006, we expensed $11.4 million and $9.7 million,
respectively, of promotional costs associated with fourth quarter high-speed internet promotions that subsidized
the cost of a new personal computer or a new digital camera in 2007, and a new personal computer in 2006,
provided to customers that entered into a multi-year commitment for certain bundled services. As we continue to
increase our sales of data products such as high-speed internet and expand the availability of our unlimited long
distance calling plans, our network access expense is likely to continue to increase. A decline in expenses
associated with access line losses, has offset some of the increase.
OTHER OPERATING EXPENSES
2007 2006 2005
($ in thousands) As Reported Acquisitions Citizens (excluding CTE and GVN) $ Change % Change Amount $ Change % Change Amount
Wage and benefit
expenses ....... $381,326 $ 28,907 $352,419 $ (6,408) -2% $358,827 $(23,841) -6% $382,668
Severance and early
retirement
costs .......... 13,874 — 13,874 6,681 93% 7,193 212 3% 6,981
Stock based
compensation . . . 9,022 — 9,022 (1,318) -13% 10,340 1,913 23% 8,427
All other operating
expenses ....... 404,279 72,086* 332,193 (24,590) -7% 356,783 3,812 1% 352,971
$808,501 $100,993 $707,508 $(25,635) -3% $733,143 $(17,904) -2% $751,047
* Includes $33.0 million of common corporate costs allocated to the CTE operations during 2007.
Consolidated other operating expenses for the year ended December 31, 2007 increased $75.4 million, or
10%, to $808.5 million as compared to the prior year, primarily the result of our 2007 acquisitions of CTE and
GVN. Other operating expenses were impacted as follows:
Wage And Benefit Expenses
Wage and benefit expenses for the year ended December 31, 2007 increased $22.5 million, or 6%, to $381.3
million as compared to the prior year. Excluding the additional wage and benefit expenses due to the CTE and
GVN acquisitions of $28.9 million, wage and benefit expenses for the year ended December 31, 2007 decreased
$6.4 million, or 2%, as compared with the prior year, primarily due to headcount reductions and associated
decreases in compensation and benefit costs.
Wage and benefit expenses for the year ended December 31, 2006 decreased $23.8 million, or 6%, as
compared with the prior year, primarily due to headcount reductions, and associated decreases in compensation
and benefits, and improved expense control in benefit costs.
Included in our “As Reported” wage and benefit expenses is pension and other postretirement benefit
expenses. The amounts for 2007 include the costs for our recently acquired Commonwealth plans and reflect the
positive impact of a pension curtailment gain of $14.4 million, resulting from the freeze placed on certain
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