Frontier Communications 2007 Annual Report Download - page 39

CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
pension benefits of the former Commonwealth non-union employees. Based on current assumptions and plan
asset values, we estimate that our pension and other postretirement benefit expenses (which were $8.8 million in
2007, including the costs associated with the Commonwealth plans, except for the pension curtailment gain of
$14.4 million), will be approximately $5.0 million to $10.0 million in 2008, and that no contribution will be
required to be made by us to the pension plan in 2008. No contribution was made to our pension plans during
2007. In future periods, if the value of our pension assets decline and/or projected benefit costs increase, we may
have increased pension and/or postretirement expenses. Also, effective December 31, 2007, the CTE Employees’
Pension Plan was merged into the Citizens Pension Plan.
Severance And Early Retirement Costs
Severance and early retirement costs for the year ended December 31, 2007 increased $6.7 million, or 93%,
as compared with the prior year, primarily due to a third quarter charge of approximately $12.1 million related to
ongoing initiatives to enhance customer service, streamline operations and reduce costs. Approximately 120
positions have been eliminated as part of that initiative, most of which have been filled by new employees at our
remaining call centers. In addition, approximately 50 field operations employees agreed to participate in an early
retirement program and another 30 employees from a variety of functions have left the Company.
Severance and early retirement costs for the year ending December 31, 2006 increased slightly from the
prior year.
Stock Based Compensation
Stock based compensation for the year ended December 31, 2007 decreased $1.3 million, or 13%, as
compared with the prior year due to reduced costs associated with stock options, since we have fewer stock
option grants that remain unvested compared to 2006.
Stock based compensation for the year ended December 31, 2006 increased $1.9 million, or 23%, as
compared with the prior year due to expensing the cost, which began in 2006, of the unvested portion of
outstanding stock options pursuant to SFAS No. 123R.
All Other Operating Expenses
All other operating expenses for the year ended December 31, 2007 increased $47.5 million, or 13%, to
$404.3 million as compared to the prior year. Excluding the additional expenses due to the CTE and GVN
acquisitions of $72.1 million, all other operating expenses for the year ended December 31, 2007 decreased $24.6
million, or 7%, as compared with the prior year, primarily due to the allocation of common corporate costs over a
larger base of operations, which now includes Commonwealth. Our purchase of Commonwealth has enabled us
to realize cost 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 consulting and other
outside services of $11.7 million for the year ended December 31, 2007 offset some of the decrease in expenses
noted above.
All other operating expenses for the year ended December 31, 2006 increased $3.8 million, or 1%, as
compared with the prior year, primarily due to sales and marketing expenses that increased due to a competitive
environment and the launch of new products.
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