Frontier Communications 2014 Annual Report Download - page 39

of the systems conversion related to the 2010 Acquisition and the lower contribution factor for end user
USF in 2013, partially offset by increased fleet costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
2014 2013 2012
($ in thousands)
Consolidated
Amount
Connecticut
Operations Amount
$ Increase
(Decrease)
%Increase
(Decrease) Amount
$ Increase
(Decrease)
% Increase
(Decrease) Amount
Frontier Legacy
Selling, general and
administrative
expenses......... $1,088,180 $29,798 $1,058,382 $869 0% $1,057,513 $(43,348) (4)% $1,100,861
Selling, general and administrative expenses (SG&A expenses) for 2014, which include the
salaries, wages and related benefits and the related costs of corporate and sales personnel, travel,
insurance, non-network related rent, advertising and other administrative expenses, increased
$1 million. This increase was primarily due to higher agent commission costs, additional compensation
costs related to our new partnership with Intuit, and an increase in certain litigation reserves in the first
quarter of 2014, mostly offset by lower allocated costs for certain benefits, including pension and
OPEB expense (as discussed below), and lower facilities costs.
SG&A expenses for 2013 decreased $43 million, or 4%, primarily due to lower costs for
compensation resulting from lower average employee headcount, lower severance costs and lower
advertising costs, partially offset by higher agent commission costs.
Pension and OPEB Costs
Pension and OPEB costs for the Company are allocated costs and included in network related
expenses and SG&A expenses. Pension and OPEB costs, excluding the impact of pension settlement
costs, for 2014, 2013 and 2012 were approximately $59 million, $78 million and $66 million,
respectively. Pension and OPEB costs include pension and OPEB expense of $74 million, $97 million
and $82 million, less amounts capitalized into the cost of capital expenditures of $15 million,
$19 million and $16 million, respectively.
Based on current assumptions and plan asset values, we estimate that our 2015 pension and
OPEB costs (which were $74 million in 2014, excluding the impact of amounts capitalized into the cost
of capital expenditures) will be approximately $85 million to $105 million, excluding the impact of
amounts capitalized into the cost of capital expenditures.
DEPRECIATION AND AMORTIZATION
2014 2013 2012
($ in thousands)
Consolidated
Amount
Connecticut
Operations Amount
$ Increase
(Decrease)
% Increase
(Decrease) Amount
$ Increase
(Decrease)
% Increase
(Decrease) Amount
Frontier Legacy
Depreciation
expense . . . . . . $ 835,470 $38,018 $ 797,452 $(44,003) (5)% $ 841,455 $ (3,186) (0)% $ 844,641
Amortization
expense . . . . . . 303,472 19,985 283,487 (44,558) (14)% 328,045 (94,121) (22)% 422,166
$1,138,942 $58,003 $1,080,939 $(88,561) (8)% $1,169,500 $(97,307) (8)% $1,266,807
Depreciation and amortization expense for 2014 decreased $89 million, or 8%, primarily due to the
accelerated method of amortization related to the customer base that was acquired in the 2010
Acquisition and changes in the remaining useful lives of certain plant assets and a lower net asset
base. We anticipate depreciation expense of approximately $960 million to $980 million and
amortization expense of approximately $345 million for 2015, including a full year associated with the
Connecticut operations.
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FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES