Frontier Communications 2012 Annual Report Download - page 50

$68.5 million, less amounts capitalized into the cost of capital expenditures of $15.8 million, $10.2 million and
$8.3 million for 2012, 2011 and 2010, respectively.
Based on current assumptions and plan asset values, we estimate that our 2013 pension and other
postretirement benefit expenses (which were $81.6 million in 2012 before amounts capitalized into the cost of
capital expenditures) will be approximately $100 million to $110 million before amounts capitalized into the
cost of capital expenditures.
All other operating expenses
All other operating expenses for 2012 decreased $122.6 million, or 11%, to $1,026.8 million, as compared
with 2011, primarily due to the elimination of redundant information technology costs with the completion of
the systems conversions, and lower outside service costs, as described above.
All other operating expenses for 2011 increased $342.0 million, or 42%, to $1,149.4 million, as compared
with 2010. All other operating expenses for 2011 increased $439.5 million as a result of the additional six
months of expenses in 2011 attributable to the Acquired Business. All other operating expenses, excluding the
additional six months of expenses related to the Acquired Business, decreased $97.5 million, or 12%, to $709.9
million, as compared with 2010, primarily due to $36.5 million in corporate costs allocated to the Acquired
Business during the first six months of 2011, combined with lower outside service fees, other taxes and
marketing costs.
Cost Savings Resulting from the Transaction
We have achieved cost savings as a result of the Transaction, principally (1) by leveraging the scalability
of our existing corporate administrative functions, information technology and network systems to cover certain
former Acquired Business functions and systems, (2) by in-sourcing certain functions formerly provided by
third-party service providers to the Acquired Business and (3) by achieving improved efficiencies and more
favorable rates with third-party vendors.
Our annualized cost savings reached approximately $653 million as of the end of 2012. The cost savings
in 2012 from our targeted initiatives list (which includes, but is not limited to, cancellation or reduction of
vendor services, network cost savings, contractor reductions, benefit changes and real estate savings) was
approximately $101 million on an annualized basis, and when combined with the savings achieved in 2011 and
2010, equates to an annualized cost savings run rate of approximately $653 million, which exceeds our original
estimate of $500 million of cost savings.
DEPRECIATION AND AMORTIZATION EXPENSE
($ in thousands) Amount
$ Increase
(Decrease)
% Increase
(Decrease) Amount
$ Increase
(Decrease)
% Increase
(Decrease) Amount
2012 2011 2010
Depreciation expense . . . . . . . ...... $ 844,641 $ (36,840) (4%) $ 881,481 $281,819 47% $599,662
Amortization expense . . . . . . . ...... 422,166 (99,528) (19%) 521,694 227,637 77% 294,057
$1,266,807 $(136,368) (10%) $1,403,175 $509,456 57% $893,719
Depreciation and amortization expense for 2012 decreased $136.4 million, or 10%, to $1,266.8 million, as
compared to 2011. Amortization expense decreased primarily due to lower amortization expense associated
with certain Frontier legacy properties that were fully amortized in 2012 and the amortization related to the
customer base that is amortized on an accelerated method. Depreciation expense decreased primarily due to a
lower net asset base and changes in the remaining useful lives of certain assets.
Depreciation and amortization expense for 2011 increased $509.5 million, or 57%, to $1,403.2 million, as
compared to 2010. Depreciation and amortization expense increased $510.9 million as a result of the additional
six months of expenses in 2011 attributable to the Acquired Business. Depreciation expense, excluding the
additional six months of expense related to the Acquired Business, increased $8.6 million, or 1%, to $608.2
million, as compared with 2010, primarily due to changes in the remaining useful lives of certain assets.
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FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES