Frontier Communications 2011 Annual Report Download - page 96

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FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
F-33
On September 8, 2011, the Company contributed four administrative properties to its qualified defined benefit pension
plan. None of the buildings were under state regulation that required individual PUC approval. The pension plan
obtained independent appraisals of the properties and, based on these appraisals, the pension plan recorded the
contributions at their fair value of $58.1 million. The Company has entered into leases for the contributed properties
for 15 years at a combined aggregate annual rent of approximately $5.8 million. The properties are managed on behalf
of the pension plan by an independent fiduciary, and the terms of the leases were negotiated with the fiduciary on an
arm’s-length basis.
The contribution and leaseback of the properties was treated as a financing transaction and, accordingly, the Company
will continue to depreciate the carrying value of the properties in its financial statements and no gain or loss was
recognized. An obligation of $58.1 million was recorded in our consolidated balance sheet as “Other liabilities” for
$57.5 million and as “Other current liabilities” for $0.6 million and will be reduced as lease payments are made to the
pension plan.
We made cash contributions of $13.1 million to the Plan during 2010. No contributions were made to the Plan during
2009. We expect that we will make a cash contribution to the Plan of approximately $60 million in 2012.
The accumulated benefit obligation for the Plan was $1,673.4 million and $1,372.6 million at December 31, 2011 and
2010, respectively.
Assumptions used in the computation of annual pension costs and valuation of the year-end obligations were as
follows:
2011 2010 2009
Discount rate - used at year end to value obligation 4.50% 5.25% 5.75%
Discount rate - used to compute annual cost 5.25% 5.75% 6.50%
Expected long-term rate of return on plan assets 8.00% 8.00% 8.00%
Rate of increase in compensation levels 2.50% 3.00% 3.00%