Windstream 2006 Annual Report Download - page 117

Product Distribution
(Millions) 2006 2005 2004
Revenues and sales:
Product sales $334.9 $307.9 $257.5
Total revenues and sales 334.9 307.9 257.5
Costs and expenses:
Cost of products sold 312.8 289.2 239.5
Selling, general, administrative and other 15.9 12.4 12.4
Depreciation and amortization 1.4 1.9 2.5
Total costs and expenses 330.1 303.5 254.4
Segment income $ 4.8 $ 4.4 $ 3.1
Revenues and sales from Windstream’s product distribution segment are primarily derived from sales of equipment to
affiliated and non-affiliated communications companies. Such revenues and sales increased $27.0 million, or 9 percent,
and $50.4 million, or 20 percent, in 2006 and 2005, respectively. Sales of telecommunications equipment and data
products to the Company’s affiliated entities increased in both periods. The increase in 2006 in affiliated sales was
primarily due to sales to the newly acquired Valor markets, while the increase in 2005 primarily reflected an increase
in capital expenditures by Windstream’s regulated wireline operations. In addition, sales to external customers
increased $10.1 million in 2006, due primarily to increases in sales to contractors and solid demand among smaller
telecommunications providers. For the year ended December 31, 2006, intercompany sales were $193.9 million, or
57.9 percent of total sales, compared to intercompany sales of $177.0 million, or 57.5 percent of total sales, in 2005.
Cost of products sold increased $23.6 million, or 8 percent, and $49.7 million, or 21 percent, in 2006 and 2005,
respectively. The increase in both periods was consistent with the growth in revenues and sales discussed above. As a
result, segment income for 2006 and 2005 was substantially unchanged compared to the prior periods.
During 2006 and 2004, restructuring and other charges in both periods amounted to $0.1 million. These charges related
to severance and employee benefit costs and were not included in segment income for the product distribution
operations. There were no restructuring and other charges related to product distribution during 2005.
Other Operations
(Millions) 2006 2005 2004
Revenues and sales:
Directory publishing $153.5 $154.7 $155.9
Telecommunications information services 8.8 17.2 41.8
Total revenues and sales 162.3 171.9 197.7
Costs and expenses:
Cost of services 9.0 17.9 34.4
Cost of products sold 111.0 114.9 126.8
Selling, general, administrative and other 27.5 25.6 14.3
Depreciation and amortization 2.2 2.1 2.0
Total costs and expenses 149.7 160.5 177.5
Segment income $ 12.6 $ 11.4 $ 20.2
Revenues and sales from the Company’s other operations are derived from revenues associated with publishing
directories for affiliated and non-affiliated local exchange carriers and charges to non-affiliated telecommunications
companies for information services (primarily customer billing). Revenues and sales attributable to the Company’s
other operations decreased $9.6 million, or 6 percent, and $25.8 million, or 13 percent, in 2006 and 2005, respectively.
Telecommunications information services revenues decreased $8.4 million, or 49 percent, in 2006 due to the loss of
billings earned from Valor, which represented the Company’s only remaining unaffiliated customer prior to the merger
with Valor. Revenues decreased $24.6 million, or 59 percent, in 2005 due to the loss of an unaffiliated wireline service
customer during the fourth quarter of 2004. Following the spin-off from Alltel and merger with Valor, the Company no
longer incurs revenues or recognizes expenses for these activities. Revenues derived from the Company’s directory
publishing operations were relatively unchanged in 2006 and 2005 compared to the prior periods.
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