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market value, at the then current rate of interest, of the remaining obligations to exchange payments under the
terms of the contracts.
On January 15, 2008, we terminated all of our interest rate swap agreements representing $400.0 million
notional amount of indebtedness associated with our Senior Notes due in 2011 and 2013. Cash proceeds on the
swap terminations of approximately $15.5 million were received in January 2008. The related gain has been
deferred on the consolidated balance sheet, and is being amortized into interest expense over the term of the
associated debt. For the years ended December 31, 2010, 2009 and 2008, we recognized $1.0 million, $7.6
million and $5.0 million, respectively, of deferred gain. We anticipate recognizing an additional $1.0 million of
deferred gain during 2011. As of December 31, 2010 and 2009, we did not have any derivative instruments.
(9) Investment Income:
The components of investment income for the years ended December 31, 2010, 2009 and 2008 are as
follows:
($ in thousands) 2010 2009 2008
Interest and dividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,471 $5,291 $10,928
Investment gain.................................................... 3,010 — —
Equity earnings.................................................... 367 994 5,190
Total investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,848 $6,285 $16,118
During 2010, we recognized a gain of $3.0 million associated with cash received on our previously
written-off investment in Adelphia.
(10) Other Income (Loss), Net:
The components of other income (loss), net for the years ended December 31, 2010, 2009 and 2008 are as
follows:
($ in thousands) 2010 2009 2008
Loss on retirement of debt, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $(45,939) $(6,290)
Split dollar life insurance policy settlement . . . . . . . . . . . . . . . . . . . . . . . 4,454 — —
Litigation settlement proceeds/(costs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,364 2,749 (1,037)
Gain on expiration/settlement of customer advances, net. . . . . . . . . . . 4,973 2,741 4,520
Other, net ...................................................... 899 (678) (2,363)
Total other income (loss), net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,690 $(41,127) $(5,170)
During 2010, we recognized a gain of $4.5 million on the settlement of a split-dollar life insurance policy
and $3.4 million in settlement proceeds related to litigation arising from businesses that the Company exited
several years ago.
During 2010, 2009 and 2008, we recognized income of $5.0 million, $2.7 million and $4.5 million,
respectively, in connection with certain retained liabilities that have terminated, associated with customer
advances for construction from our disposed water properties.
During the fourth quarter of 2009, we recognized a loss of $53.7 million on the early retirement of debt in
connection with a $700.0 million debt tender offer. During 2009, we also recognized a $7.8 million gain as a
result of repurchasing $396.7 million principal amount of debt. During 2009, we recorded litigation settlement
proceeds of $2.7 million in connection with the Bangor, Maine legal matter.
During 2008, we retired certain debt and recognized a loss of $6.3 million on the early extinguishment of
debt at a premium, mainly for the 9.25% Senior Notes due 2011. During 2008, we recorded legal fees and
settlement costs in connection with the Bangor, Maine legal matter of $1.0 million.
F-20
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements