Windstream 2006 Annual Report Download - page 110

A summary of the restructuring and other charges recorded by our wireline operations in 2005 was as follows:
(Millions)
Severance and employee benefit costs $ 4.5
Fees associated with spin-off and merger of wireline operations 31.2
Total restructuring and other charges $ 35.7
During the third quarter of 2005, the Company incurred $4.7 million of severance and employee benefit costs related to
a planned workforce reduction in its wireline operations. In the fourth quarter of 2005, the Company reduced the
liabilities associated with the wireline restructuring activities by $0.2 million to reflect differences between estimated
and actual costs paid in completing the employee terminations. As of December 31, 2005, Windstream had paid
$4.5 million in severance and employee-related expenses, and all of the employee reductions had been completed. In
connection with the spin-off from Alltel and merger with Valor, the Company incurred $31.2 million of incremental
costs during the fourth quarter of 2005, principally representing accrued investment banker, audit and legal fees, which
were paid through advances from Alltel.
A summary of the restructuring and other charges recorded in 2004 was as follows:
(Millions) Wireline
Product
Distribution
Other
Operations Total
Severance and employee benefit costs $ 11.2 $ 0.1 $ 0.3 $ 11.6
Relocation costs 1.2 - 0.1 1.3
Lease and contract termination costs (1.8) - - (1.8)
Other exit costs 0.7 - - 0.7
Total restructuring and other charges $ 11.3 $ 0.1 $ 0.4 $ 11.8
In January 2004, the Company announced plans to reorganize its operations and support teams. Also during February
2004, the Company announced plans to exit its competitive local exchange carrier operations in the Jacksonville,
Florida market due to the continued unprofitability of these operations. In connection with these activities, the
Company recorded a restructuring charge of $13.6 million, consisting of $11.6 million in severance and employee
benefit costs related to a planned workforce reduction, $1.3 million of employee relocation expenses and $0.7 million
of other exit costs. As of December 31, 2005, the Company had paid all of the severance and employee-related
expenses, and all of the employee reductions and relocations had been completed. During 2004, the Company also
recorded a $1.8 million reduction in the liabilities associated with various restructuring activities initiated prior to 2003,
consisting of lease and contract termination costs. The reductions primarily reflected differences between estimated
and actual costs paid in completing the lease and contract terminations.
Restructuring and other charges decreased net income $36.0 million, $34.1 million and $7.3 million for the years ended
December 31, 2006, 2005 and 2004, respectively, giving consideration to tax benefits on deductible items. The
restructuring and other charges discussed above were not allocated to our business segments, as management evaluates
segment performance excluding the effects of these items. See Note 10 to the accompanying consolidated financial
statements for additional information regarding these charges.
Other Income, Net
Other income, net decreased $2.9 million, or 25 percent, in 2006 and decreased $2.1 million, or 15 percent, in 2005.
The decrease in other income in 2006 primarily resulted from a decrease in the amount of annual dividends paid on our
investment in Rural Telephone Bank Class C stock. As of December 31, 2005, our investment in Rural Telephone
Bank Class C stock was transferred to Alltel. As a result, we did not receive any related dividends during 2006. This
decline in 2006 was partially offset by a $7.4 million increase in interest income earned on cash and short-term
investments, which totaled $386.8 million at December 31, 2006.
Loss on Extinguishment of Debt
In conjunction with the spin-off from Alltel, as previously discussed, the Company repaid a portion of the long-term
debt that had been issued by certain of the Company’s wireline subsidiaries. As a result, the Company incurred debt
prepayment penalties of $7.9 million in 2006.
Intercompany Interest Income (Expense)
Prior to the spin-off from Alltel, the Company participated in a centralized cash management program with its parent
company. Under this program, the Company earned interest on amounts remitted to Alltel at a rate based on current
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