Frontier Communications 2013 Annual Report Download - page 96

Download and view the complete annual report

Please find page 96 of the 2013 Frontier Communications annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 106

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106

We capitalized $19.2 million, $15.8 million and $10.2 million of pension and OPEB expense into the cost
of our capital expenditures during the years ended December 31, 2013, 2012 and 2011, respectively, as the
costs relate to our engineering and plant construction activities.
Based on current assumptions and plan asset values, we estimate that our 2014 pension and OPEB
expenses will be approximately $65 million to $85 million for our current business operations before amounts
capitalized into the cost of capital expenditures and the impact of pension settlement costs, if any.
The plan’s weighted average asset allocations at December 31, 2013 and 2012 by asset category are as
follows:
2013 2012
Asset category:
Equity securities . ....................................................... 42% 43%
Debt securities . . . ....................................................... 44% 40%
Alternative investments .................................................. 13% 14%
Cash and other. . . ....................................................... 1% 3%
Total............................................................... 100% 100%
The plan’s expected benefit payments over the next 10 years are as follows:
($ in thousands)
Amount
2014 $ 100,839
2015 104,480
2016 110,570
2017 114,703
2018 117,055
2019-2023 633,650
Total $1,181,297
During 2013, the Company contributed four real estate properties to its qualified defined benefit pension
plan. 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 $23.4 million. The Company has entered into
leases for the contributed properties for 15 years at a combined aggregate annual rent of approximately $2.1
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.
We made total contributions to our pension plan during 2013 of $62.3 million, consisting of cash
payments of $38.9 million and the contribution of real property with a fair value of $23.4 million, as described
above.
We made total net cash contributions to our pension plan for 2012 of $28.6 million, consisting of net cash
payments of $18.3 million in the third quarter and $10.3 million in the fourth quarter. These pension
contributions reflect the positive impact of funding rate changes contained in the Highway Investment Act of
2012 and guidance from the IRS on August 16, 2012 related to valuation rates, and on September 11, 2012
related to lump sum methodologies.
We made contributions to our pension plan of approximately $76.7 million in 2011, consisting of cash
payments of $18.6 million and, as described below, the contribution of real property with a fair value of $58.1
million.
On September 8, 2011, the Company contributed four administrative properties to its qualified defined
benefit pension plan. 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 $5.8
F-34
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements