<PAGE>
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT
Pursuant to Section 15(d) of
The Securities Exchange Act of 1934
For the years ended December 31, 1996 and 1995
Commission File Number 1-4166
FRONTIER CORPORATION
EMPLOYEES'
RETIREMENT SAVINGS PLAN
(Full name of plan)
FRONTIER CORPORATION
(Name of issuer of securities
held pursuant to the plan)
180 South Clinton Avenue
Rochester, New York 14646-0700
(Address of principal executive offices)
REQUIRED INFORMATION
In accordance with the applicable provisions of Article 6A of
Regulation S-X, the following financial statements are filed as
part of this Report.
Report of Independent Accountants
Statements of Net Assets Available for Benefits with
Fund Information at December 31, 1996 and 1995
Statement of Changes in Net Assets Available for Benefits
with Fund Information for the year ended December 31, 1996
Notes to Financial Statements
Schedule of Assets Held for Investment
Schedule of Reportable Transactions
The following exhibit is filed as part of this Report.
Consent of Independent Accountants
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FRONTIER CORPORATION
EMPLOYEES' RETIREMENT SAVINGS PLAN
Financial Statements
For the years ended
December 31, 1996 and 1995
<PAGE>
<PAGE> 3
Index to Financial Statements
Report of Independent Accountants Page 2
Statements of Net Assets Available for Benefits with
Fund Information at December 31, 1996 and 1995 Pages 3 - 4
Statement of Changes in Net Assets Available for Benefits
with Fund Information for the year ended December
31, 1996 Page 5
Notes to Financial Statements Pages 6 - 10
Line 27a - Schedule of Assets Held for Investment
Purposes Schedule I
Line 27d - Schedule of Reportable Transactions Schedule II
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Page 2
Report of Independent Accountants
April 25, 1997
To the Participants and Administrator of the
Frontier Corporation Employees' Retirement Savings Plan
In our opinion, the accompanying statements of net assets
available for benefits, and the related statement of changes
in net assets available for benefits present fairly, in all
material respects, the net assets available for benefits of
the Frontier Corporation Employees' Retirement Savings Plan
at December 31, 1996 and 1995, and the changes in net assets
available for benefits for the year ended December 31, 1996,
in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the
Plan's management; our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits of these statements in accordance
with generally accepted auditing standards which require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting
principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Our audits were made for the purpose of forming an opinion
on the basic financial statements taken as a whole. The
additional information included in Schedules I and II is
presented for purposes of additional analysis and is not a
required part of the basic financial statements but is
additional information required by the Employee Retirement
Income Security Act of 1974 ("ERISA"). Such information has
been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion,
is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
PRICE WATERHOUSE LLP
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<PAGE> 5
Statement of Net Assets Available for Benefits with Fund Information
<TABLE>
December 31, 1996
Fund A Fund B Fund C Fund D Fund E
<S> <C> <C> <C> <C> <C>
Assets
Investments, at fair value:
Registered investment companies -
Putnam Income Fund $11,650,526
Putnam Global Growth Fund $15,560,199
Putnam Voyager Fund $34,155,805
Putnam S & P 500 Index Fund $18,789,909
Frontier Corporation Common Stock
Participant loans
Investments, at contract value:
Stable Value Fund $39,514,456
Total investments 11,650,526 15,560,199 34,155,805 39,514,456 18,789,909
Receivables:
Participants' contributions
Employer's contributions
From other plan
Total receivables
Total assets 11,650,526 15,560,199 34,155,805 39,514,456 18,789,909
Net assets available
for benefits $11,650,526 $15,560,199 $34,155,805 $39,514,456 $18,789,909
</TABLE>
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Statement of Net Assets Available for Benefits with Fund Information
<TABLE>
December 31, 1996
Participant
Fund F Loans Other Total
<S> <C> <C> <C> <C>
Assets
Investments, at fair value:
Registered investment companies -
Putnam Income Fund $11,650,526
Putnam Global Growth Fund 15,560,199
Putnam Voyager Fund 34,155,805
Putnam S & P 500 Index Fund 18,789,909
Frontier Corporation Common Stock $ 45,283,094 45,283,094
Participant loans $6,006,035 6,006,035
Investments, at contract value:
Stable Value Fund 39,514,456
Total investments 45,283,094 6,006,035 170,960,024
Receivables:
Participants' contributions $ 1,178,593 1,178,593
Employer's contributions 478,034 478,034
From other plan 1,018,239 1,018,239
Total receivables 2,674,866 2,674,866
Total assets 45,283,094 6,006,035 2,674,866 173,634,890
Net assets available for benefits $45,283,094 $6,006,035 $2,674,866 $173,634,890
</TABLE>
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Statement of Net Assets Available for Benefits with Fund Information
<TABLE>
December 31, 1995
Fund A Fund B Fund C Fund D Fund E
<S> <C> <C> <C> <C> <C>
Assets
Investments, at fair value:
Cash $ 279,621
Registered investment companies -
Putnam Income Fund $10,440,252
Putnam Global Growth Fund $ 10,331,789
Putnam Voyager Fund $19,464,217
Putnam S & P 500 Index Fund $ 11,579,483
Frontier Corporation Common Stock
Other assets
Participant loans
Investments, at contract value:
Principal Mutual Life Insurance Company 4,924,240
New York Life Insurance Company 6,073,385
Prudential Insurance Company of America 6,502,977
John Hancock Mutual Life Insurance Company 8,804,135
Metropolitan Life Insurance Company 4,093,332
CNA Life Insurance Company 1,830,665
Peoples Security Life Insurance Company 4,753,057
Allstate Life Insurance Company 2,487,474
Total investments 10,440,252 10,331,789 19,464,217 39,748,886 11,579,483
Receivables:
Participants' contributions
Employer's contributions
Total receivables
Total assets 10,440,252 10,331,789 19,464,217 39,748,886 11,579,483
Net assets available
for benefits $10,440,252 $10,331,789 $19,464,217 $39,748,886 $11,579,483
</TABLE>
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Statement of Net Assets Available for Benefits with Fund Information
<TABLE>
December 31, 1995
Participant
Fund F Fund G Loans Other Total
<S> <C> <C> <C> <C> <C>
Assets
Investments, at fair value:
Cash $ 279,621
Registered investment companies -
Putnam Income Fund 10,440,252
Putnam Global Growth Fund 10,331,789
Putnam Voyager Fund 19,464,217
Putnam S & P 500 Index Fund 11,579,483
Frontier Corporation Common Stock $ 47,097,500 47,097,500
Other assets $ 52,102 52,102
Participant loans $4,845,436 4,845,436
Investments, at contract value:
Principal Mutual Life Insurance Company 4,924,240
New York Life Insurance Company 6,073,385
Prudential Insurance Company of America 6,502,977
John Hancock Mutual Life Insurance Company 8,804,135
Metropolitan Life Insurance Company 4,093,332
CNA Life Insurance Company 1,830,665
Peoples Security Life Insurance Company 4,753,057
Allstate Life Insurance Company 2,487,474
Total investments 47,097,500 52,102 4,845,436 143,559,665
Receivables:
Participants' contributions $ 801,656 801,656
Employer's contributions 655,619 655,619
Total receivables 1,457,275 1,457,275
Total assets 47,097,500 52,102 4,845,436 1,457,275 145,016,940
Net assets available for benefits $47,097,500 $ 52,102 $4,845,436 $1,457,275 $145,016,940
</TABLE>
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Statement of Changes in Net Assets Available
for Benefits with Fund Information
<TABLE>
Year ended December 31, 1996
Fund A Fund B Fund C Fund D Fund E
<S> <C> <C> <C> <C> <C>
Additions
Additions to net assets attributed to:
Investment income -
Interest and dividends $ 831,945 $1,092,330 $ 2,161,527 $ 2,542,740
Realized (loss) gain (18,989) 233,047 1,039,485 $ 689,278
Net (depreciation) appreciation in
fair value of
investments (409,602) 735,487 404,348 2,717,802
Participant loan interest income
Other income 1,396
Contributions -
Participants'
contributions 1,298,313 2,303,937 5,713,976 2,366,092 2,182,309
Employer's contributions
Total additions
(deductions) 1,701,667 4,364,801 9,319,336 4,910,228 5,589,389
Deductions
Deductions from net assets attributed to:
Benefits paid to
participants 1,177,716 1,371,475 3,140,606 4,648,262 1,242,969
Other expense 1,265 2,243 4,928 3,533 2,051
Total deductions 1,178,981 1,373,718 3,145,534 4,651,795 1,245,020
Net increase (decrease) prior
to transfers
from other plans
and interfund transfers 522,686 2,991,083 6,173,802 258,433 4,344,369
Transfers from
other plans 1,795,853 88,535 7,785,110 4,502,211 3,627,924
Interfund transfers (1,108,265) 2,148,792 732,676 (4,995,074) (761,867)
Net increase (decrease) 1,210,274 5,228,410 14,691,588 (234,430) 7,210,426
Net assets available for benefits:
Beginning of year 10,440,252 10,331,789 19,464,217 39,748,886 11,579,483
End of year $11,650,526 $15,560,199 $34,155,805 $39,514,456 $18,789,909
</TABLE>
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Statement of Changes in Net Assets Available for
Benefits with Fund Information
<TABLE>
Year ended December 31, 1996
Participant
Fund F Fund G Loans Other Total
<S> <C> <C> <C> <C> <C>
Additions
Additions to net assets attributed to:
Investment income -
Interest and dividends $ 1,544,838 $ 8,173,380
Realized (loss) gain 1,284,041 3,226,862
Net (depreciation) appreciation in
fair value of
investments (17,113,850) (13,665,815)
Participant loan
interest income $358,881 358,881
Other income 1,396
Contributions -
Participants'
contributions 2,982,368 93,057 $ 1,178,593 18,118,645
Employer's contributions 6,353,539 478,034 6,831,573
Total additions
(deductions) (4,949,064) 451,938 1,656,627 23,044,922
Deductions
Deductions from net assets attributed to:
Benefits paid to
participants 3,505,058 293,911 15,379,997
Other expense 764 14,784
Total deductions 3,505,822 293,911 15,394,781
Net increase (decrease) prior to transfers
from other plans and interfund
transfers (8,454,886) 158,027 1,656,627 7,650,141
Transfers from other plans 1,526,337 623,600 1,018,239 20,967,809
Interfund transfers 5,114,143 $ (52,102) 378,972 (1,457,275) - 0 -
Net increase
(decrease) (1,814,406) (52,102) 1,160,599 1,217,591 28,617,950
Net assets available for benefits:
Beginning of year 47,097,500 52,102 4,845,436 1,457,275 145,016,940
End of year $45,283,094 $ - 0 - $6,006,035 $2,674,866 $173,634,890
The accompanying notes are an integral part of these financial statements.
</TABLE>
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NOTE 1 - DESCRIPTION OF THE PLAN
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The Frontier Corporation Employees' Retirement Savings Plan (the
"Plan") is a defined contribution plan established by the Board
of Directors of Frontier Corporation (the "Company") effective
March 1, 1994. The Plan is subject to the applicable provisions
of the Employee Retirement Income Security Act of 1974 ("ERISA").
The Plan provides participants the option of having their basic
and supplemental contributions to the Plan made on a salary
reduction basis and on a deferred tax basis.
During Plan year end December 31, 1996, the following plans
merged into the Frontier Corporation Employees' Retirement
Savings Plan: ETI Retirement Savings Plan, Confertech
International Employee Savings 401(k) Plan, and the Allnet
Communication Services, Inc. 401(k) Plan. Net assets of
$19,949,570 were transferred from these plans during Plan year
end December 31, 1996.
Effective December 31, 1996, the Link USA Corporation 401(k) Plan
merged with the Plan. At December 31, 1996, $1,018,239 was owed
to the Plan from the former trustee of the Link USA Corporation
401(k) Plan.
During Plan year end December 31, 1995, the following plans
merged into the Frontier Corporation Employees' Retirement
Savings Plan: CC&S Systems Inc. 401(k) Plan, Orion Telephone
Profit Sharing Plan, RCI Long Distance New England, Inc. 401(k)
Profit Sharing Plan, Illinois Group Office Workers' Retirement
Plan, and the American Sharecom Savings Plan. Net assets of
$11,522,740 were transferred from these plans during Plan year
end December 31, 1995.
The principal provisions of the Plan are described below and are
provided for general information purposes only. Participants
should refer to the Plan document for a more complete description
of the Plan's provisions.
Participation
- ---------------
Certain non-bargaining employees are eligible to participate in
the Plan upon the first of the month after 30 days of employment.
Administration
- ----------------
The Plan is administered by the Company's Employee Benefit
Committee whose members are appointed by the Company's Board of
Directors. The Trustee of the Plan is Putnam Fiduciary Trust
Company.
Funding policy
- ---------------
Upon enrollment in the Plan, a participant may direct
contributions into any of six investment options.
Fund A - Putnam Income Fund - Funds are primarily
invested in Corporate bonds and U.S. government and
agency obligations.
Fund B - Putnam Global Growth Fund - Funds are
primarily invested in foreign and domestic common
stocks.
Fund C - Putnam Voyager Fund - Funds are invested in
emerging growth companies and opportunity stocks.
Fund D - Stable Value Fund - Funds are invested in an
insurance company pooled separate account.
Fund E - Putnam S & P 500 Index Fund - Funds are
primarily invested in stocks that comprise the S &
P 500 Index.
Fund F - Frontier Corporation Common Stock - Funds are
invested in common stock of Frontier Corporation.
Fund G - Pending Fund - This Fund represents a
"holding" fund created by Putnam Fiduciary Trust
Company for funds that are in the process of being
transferred from one fund option to another fund
option but for which the transaction has not been
completed.
The shares of stock in Fund F are qualified employer securities
as defined by ERISA. Each individual's investment in these funds
is recorded in his or her account on a per share basis. All
other funds are tracked on a dollar value basis with each fund's
activity allocated to participants on a pro rata basis.
Therefore the plan does not record activity on a unit value
basis.
The Plan provides that each participant may voluntarily make
contributions through a salary reduction agreement for whatever
whole percentage a participant chooses, up to a maximum of 16%,
subject to maximum contributions imposed by the Internal Revenue
Code under Section 401(k).
Individual accounts which record the participants' contributions,
the earnings on all contributions and the amount of the
participant's interest in each fund are maintained for each
participant. The participants' contributions during a month are
allocated directly to their individual account when contributions
are received by the Trustee. Participants have the option to
invest their contributions in any of the funds and may change
their allocation between funds at any time.
Employer matching contributions equal 100% of participant
contributions, up to the first 3% of compensation. In addition,
each payroll period, the Company contributes .5% of the payroll
period compensation for each of its employees who is a
participant in the Plan. All employer contributions will be
invested initially in Fund F. All employer contributions
invested in this Fund must remain for five years, while an active
participant, after which time the participant may elect to
transfer the amounts to any of the other funds or retain the
amounts in this Fund. If the participant terminates service with
the Company, he or she may elect to transfer the amounts in Fund
F to any other funds or retain the amounts in this Fund.
Each Plan year, the Company, at its discretion, may contribute
additional amounts to participants.
Vesting
- -------------
Participants are immediately 100% vested in their voluntary
contributions and actual earnings thereon. Effective January 1,
1996, the Plan changed its vesting period for Company
contributions from six months of credited service to immediate.
Prior to this change, forfeited nonvested accounts were used to
reduce future employer contributions.
Payment of benefits
- -------------------
Upon termination of service and attaining normal retirement age
(65), a participant may elect to receive either a lump-sum amount
equal to the value of his or her vested account balance, or a
participant may elect to receive installments over a period not
to exceed 20 years.
If upon termination of service, a participant does not attain
normal retirement age, he or she may elect to receive a lump-sum
amount, a direct rollover to a qualified plan under Section 401
of the Internal Revenue Code, or a direct rollover to a qualified
Individual Retirement Account equal to the value of his or her
vested account balance.
Individual participant loans
- -----------------------------
Participant loans cannot exceed the lesser of 50% of the vested
amounts in the participant's account or $50,000. A participant
may only have two loans outstanding, and they are treated as
directed investments by the borrower with respect to his or her
account. Interest is charged on outstanding borrowings at the
prime rate which was 8.25% at December 31, 1996. Interest paid
on the loan is credited to the borrower's account and the
participant does not share in the income of the Plan's assets
with respect to the amounts outstanding. Loans have a term of no
more than five years except that a loan may be granted for a
period not to exceed 25 years if the proceeds are used to
purchase the participant's principal residence. During the Plan
year ended December 31, 1996, $2,638,194 in loans were disbursed
and principal repayments of $2,168,429 were made.
Plan termination
- ----------------
Although it has not expressed any intent to do so, the Company
reserves the right under the Plan to discontinue its
contributions and/or to terminate the Plan at any time. Upon
termination, all amounts funded shall become nonforfeitable and
shall be provided for and paid from the Plan's trust in
accordance with the order priority set forth in Section 4044 of
ERISA.
The Plan is not a defined benefit plan and, accordingly, Plan
benefits are not guaranteed by the Pension Benefit Guaranty
Corporation.
The Plan's holdings of Frontier Corporation common stock and four
Putnam Investment, Inc. registered investment company funds are
party-in-interest investments.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
The financial statements have been prepared on the accrual basis
of accounting.
Use of estimates
- ----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities at year end and the reported investment
income and expenses during the Plan year.
Contributions and benefits paid
- -------------------------------
Contributions are recorded by the Plan when withheld from
employees and accrued by the Company. Benefits to participants
are recorded by the Plan when a request for disbursement is
received from the employee.
Participants may receive distributions in cash or in common stock
of Frontier Corporation for amounts invested in Fund F.
Purchases and sales of securities are recorded on the trade date.
Administrative expenses
- ------------------------
Significant expenses associated with the Plan are paid by the
Company.
Valuation of investment assets
- ------------------------------
The Plan's interest in registered investment companies and
employer securities is stated at fair value, measured by the
quoted market price. Adjustments for unrealized appreciation or
depreciation of such values are included in the operating results
of the Plan. Funds invested in the Stable Value Fund are stated
at contract value, measured as cost plus earned interest income.
Contract value approximates fair market value at December 31,
1996 and 1995.
NOTE 3 - PARTICIPANT ACCOUNTS
- ------------------------------
As of December 31, 1996 and 1995, the Plan held 2,001,454 and
1,569,917 shares of Frontier Corporation common stock at a fair
market value of $45,283,094 and $47,097,500, respectively. Of
these shares, 236,758 were contributed by the Company during the
Plan year ended December 31, 1996, as the Company's matching
contribution. During the Plan year ended December 31, 1996,
35,666 shares of Frontier Corporation common stock were
distributed to participants.
NOTE 4 - FEDERAL INCOME TAX STATUS
- ----------------------------------
The Plan Administrator has received a favorable determination
letter from the Internal Revenue Service covering the Plan as
amended through February 2, 1995 stating that the Plan, as
designed, is a qualified plan in accordance with Section 401(a) of
the Internal Revenue Code, and its corresponding trust is exempt
from taxation under Section 501(a) of the Code. The Plan
Administrator believes the Plan is being operated as designed and,
therefore, maintains its tax-qualified status.
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Line 27a - Schedule of Assets Held for Investment Purposes
Schedule 1
Current
Number value at
of December 31,
Description/Issuer shares Cost 1996
Interests in Registered Investment Companies:
* Putnam Income Fund 1,661,990 $11,382,328 $11,650,526
* Putnam Global Growth Fund 1,438,097 14,400,731 15,560,199
* Putnam Voyager Fund 2,118,847 30,035,976 34,155,805
* Putnam S & P 500 Index Fund 1,104,640 13,471,202 18,789,909
Total interests in registered
investment companies 69,290,237 80,156,439
Common Stock:
* Frontier Corporation 2,001,454 48,833,201 45,283,094
Participant Loans:
Participant loan accounts
(average rate 8.5%) 6,006,035 6,006,035
Insurance Company Pooled Separate Account:
Stable Value Fund 39,514,456 39,514,456
Total investments $163,643,929 $170,960,024
* Denotes party-in-interest
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Line 27d - Schedule of Assets Held for Investment Purposes
Schedule 2
<TABLE>
Number
Identity of Description of Purchase Selling
party involved of asset transactions price price
<S> <C> <C> <C> <C>
Series of Transactions:
Putnam Global Growth Fund Registered Investments 280 $7,416,023 N/A
Putnam Voyager Fund Registered Investments 377 14,479,656 N/A
Putnam Voyager Fund Registered Investments 415 N/A $ 9,016,999
Stable Value Fund Insurance Company Pooled
Separate Account 472 9,230,410 N/A
Stable Value Fund Insurance Company Pooled
Separate Account 449 N/A 13,966,909
Frontier Corporation Common Stock 352 20,231,123 N/A
Frontier Corporation Common Stock 331 N/A 7,742,254
</TABLE>
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<PAGE> 14
Line 27d - Schedule of Assets Held for Investment Purposes
Schedule 2
<TABLE>
Expense Current value
incurred of asset on
Identity of Lease with Cost of transaction Net
party involved rental transaction asset date gain
<S> <C> <C> <C> <C> <C>
Series of Transactions:
Putnam Global Growth
Fund Registered Investments N/A N/A $ 7,416,023 $ 7,416,023
Putnam Voyager Fund Registered Investments N/A N/A 14,479,656 14,479,656
Putnam Voyager Fund Registered Investments N/A N/A 7,977,514 9,016,999 $1,039,485
Stable Value Fund Insurance Company Pooled
Separate Account N/A N/A 9,230,410 9,230,410
Stable Value Fund Insurance Company Pooled
Separate Account N/A N/A 13,966,909 13,966,909
Frontier
Corporation Common Stock N/A N/A 20,231,123 20,231,123
Frontier
Corporation Common Stock N/A N/A 6,458,213 7,742,254 1,284,041
</TABLE>
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<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit
plan) have duly caused this annual report to be signed on its
behalf by the undersigned thereunto duly authorized.
Frontier Corporation
Employees' Retirement Savings Plan
Date: June 26, 1997 /s/Richard A. Smith
-----------------------------
Richard A. Smith Controller
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Prospectus constituting part of the Registration Statement on
Form S-8 (File No. 33-51885) of Frontier Corporation of our
report dated April 25, 1997 appearing on page 2 of this Form 11-
K.
/s/Price Waterhouse
- ---------------------------
PRICE WATERHOUSE LLP
Rochester, New York
June 25, 1997
