Frontier Communications 2007 Annual Report Download - page 40

CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
DEPRECIATION AND AMORTIZATION EXPENSE
2007 2006 2005
($ in thousands) As Reported Acquisitions
Citizens
(excluding
CTE and
GVN) $ Change % Change Amount $ Change % Change Amount
Depreciation expense .... $374,435 $45,289 $329,146 $(20,961) -6% $350,107 $(43,719) -11% $393,826
Amortization expense .... 171,421 45,042* 126,379 (1) 0% 126,380 2 0% 126,378
$545,856 $90,331 $455,525 $(20,962) -4% $476,487 $(43,717) -8% $520,204
* Represents amortization expense related to the customer base acquired in the CTE and GVN acquisitions, and
the Commonwealth trade name. Our assessment of the value of the customer base and trade name, and
associated expected useful life, are based upon independent appraisal.
Consolidated depreciation and amortization expense for the year ended December 31, 2007 increased $69.4
million, or 15%, to $545.9 million as compared to the prior year as a result of our 2007 acquisitions of CTE and
GVN. Excluding the impact of our 2007 acquisitions, depreciation expense for the years ended December 31,
2007 and 2006 decreased $21.0 million, or 6%, and $43.7 million, or 11%, respectively, as compared with the
prior years due to a declining net asset base partially offset by changes in the remaining useful lives of certain
assets. An independent study updating the estimated remaining useful lives of our plant assets is performed
annually. We adopted the lives proposed in the study effective October 1, 2007. Our “composite depreciation
rate” increased from 5.25% to 5.45% as a result of the study. We anticipate depreciation expense of
approximately $350.0 million to $370.0 million for 2008.
INVESTMENT INCOME / OTHER INCOME (LOSS), NET / INTEREST EXPENSE /
INCOME TAX EXPENSE
2007 2006 2005
($ in thousands) As Reported Acquisitions Citizens (excluding CTE and GVN) $ Change % Change Amount $ Change % Change Amount
Investment income ..... $ 35,781 $ 402 $ 35,379 $(44,057) -55% $ 79,436 $67,213 550% $ 12,223
Other income (loss),
net ................ $(17,833) $ 4,978 $ (22,811) $(25,818) -859% $ 3,007 $ 2,251 298% $ 756
Interest expense ........ $380,696 $ (260) $380,956 $ 44,510 13% $336,446 $ (2,289) -1% $338,735
Income tax expense ..... $128,014 $27,013 $101,001 $(35,478) -26% $136,479 $61,209 81% $ 75,270
Investment Income
Investment income for the year ended December 31, 2007 decreased $43.7 million, or 55%, to $35.8 million
as compared to the prior year. Excluding the investment income due to the CTE and GVN acquisitions of $0.4
million, investment income for the year ended December 31, 2007 decreased $44.1 million, as compared with the
prior year, primarily due to the $64.6 million in proceeds received in 2006 from the RTB liquidation and
dissolution, partially offset by an increase of $10.8 million in income from short-term investments of cash and
lower minority interest in joint ventures of $2.3 million.
We borrowed $550.0 million in December 2006 in anticipation of the Commonwealth acquisition in 2007.
Our average cash balance was $594.2 million and $429.5 million for the years ended December 31, 2007 and
2006, respectively.
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