Frontier Communications 2007 Annual Report Download - page 95

CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
On June 24, 2004, one of our subsidiaries, Frontier Subsidiary Telco, Inc., received a “Notice of Indemnity
Claim” from Citibank, N.A., that is related to a complaint pending against Citibank and others in the U.S.
Bankruptcy Court for the Southern District of New York as part of the Global Crossing bankruptcy proceeding.
Citibank bases its claim for indemnity on the provisions of a credit agreement that was entered into in October 2000
between Citibank and our subsidiary. We purchased Frontier Subsidiary Telco, Inc., in June 2001 as part of our
acquisition of the Frontier 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 Inc. Although the
credit agreement was paid off at the closing of the Frontier transaction, Citibank claims the indemnification
obligation survives. Damages sought against Citibank and its co-defendants could exceed $1.0 billion. In August
2004, we notified Citibank by letter that we believe its claims for indemnification are invalid and are not supported
by applicable law. In 2005, Citibank moved to dismiss the underlying complaint against it. That motion is currently
pending. We have received no further communications from Citibank since our August 2004 letter.
We are party to various other legal proceedings arising in the normal course of our business. The outcome of
individual matters is not predictable. However, we believe that the ultimate resolution of all such matters, after
considering insurance coverage, will not have a material adverse effect on our financial position, results of
operations, or our cash flows.
Although we from time to time make short-term purchasing commitments to vendors with respect to these
expenditures, we generally do not enter into firm, written contracts for such activities.
We conduct certain of our operations in leased premises and also lease certain equipment and other assets
pursuant to operating leases. The lease arrangements have terms ranging from 1 to 99 years and several contain
rent escalation clauses providing for increases in monthly rent at specific intervals. When rent escalation clauses
exist, we record total expected rent payments on a straight-line basis over the lease term. Certain leases also have
renewal options. Renewal options that are reasonably assured are included in determining the lease term. Future
minimum rental commitments for all long-term noncancelable operating leases and future minimum capital lease
payments for continuing operations as of December 31, 2007 are as follows:
($ in thousands) Operating Leases
Year ending December 31:
2008 ................................................. $24,094
2009 ................................................. 12,436
2010 ................................................. 10,963
2011 ................................................. 9,604
2012 ................................................. 6,421
Thereafter ............................................ 15,534
Total minimum lease payments ........................... $79,052
Total rental expense included in our results of operations for the years ended December 31, 2007, 2006 and
2005 was $23.6 million, $16.3 million and $16.9 million, respectively.
We are a party to contracts with several unrelated long distance carriers. The contracts provide fees based on
traffic they carry for us subject to minimum monthly fees.
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