Windstream 2006 Annual Report Download - page 118

Segment income for Windstream’s other operations increased $1.2 million, or 11 percent, in 2006 and decreased $8.8
million, or 44 percent, in 2005. The increase in 2006 was primarily due to an improvement in the profit margins in the
directory publishing operations as a result of a reduction in bad debt expense caused by improved collection rates. The
decline in 2005 was primarily due to the declining profit margins in the telecommunications information services
operations, as the revenue declines due to the loss of customers noted above outpaced the corresponding reduction in
operating expenses due to the continuance of overhead and other fixed operating costs.
For further discussion of the pending sale of the publishing business, see Note 17, “Pending Transactions”, to the
consolidated financial statements.
Set forth below is a summary of the restructuring and other charges related to the other operations that were not
included in the determination of segment income for the years ended December 31:
(Millions) 2006 2005 2004
Costs associated with split-off of directory publishing $ 11.2 $ - $ -
Severance and employee benefit costs - - 0.3
Relocation costs - - 0.1
Total restructuring and other charges $ 11.2 $ - $ 0.4
Segment Capital Requirements
The primary uses of cash for our operating segments are capital expenditures for property, plant and equipment to
support our wireline operations. Annual capital expenditures by operating segment are forecasted as follows for 2007:
(Millions)
Range of
Capital Expenditures
Wireline $ 347.0 - $ 377.0
Product Distribution 0.3 - 0.3
Other Operations 2.7 - 2.7
Totals $ 350.0 - $ 380.0
Capital expenditures for 2007 will be primarily incurred to construct additional network facilities and to upgrade our
telecommunications network. The forecasted spending levels in 2007 are subject to revision depending on changes in
future capital requirements of our business segments. Each of our operating segments in 2006 generated positive cash
flows sufficient to fund their day-to-day operations and to fund their capital requirements. We expect our operating
segments to continue to generate sufficient cash flows in 2007 to fund their operations and capital requirements.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
(Millions) 2006 2005 2004
Cash flows from (used in):
Operating activities $ 1,125.2 $ 954.6 $ 968.3
Investing activities (299.0) (353.6) (335.6)
Financing activities (451.3) (602.4) (627.1)
Effect of exchange rate changes - - (0.1)
Change in cash and short-term investments $ 374.9 $ (1.4) $ 5.5
Cash Flows – Operating Activities
Cash provided from operations is the Company’s primary source of funds. The increase in cash provided from
operations in 2006 compared to 2005 is driven primarily by increased cash flows due to the acquisition of Valor. The
decrease in cash provided from operations in 2005 primarily was due to the decline in earnings from our wireline
business segment. Additionally, cash flows from continuing operations in both years also reflected changes involving
capital requirements, including timing differences in billing and collections of accounts receivable, purchases of
inventory, and the payment of trade payables, interest and taxes. During 2006, the Company generated sufficient cash
flows from operations to fund its capital expenditure requirements, dividend payments and scheduled long-term debt
payments as further discussed below. The Company expects to generate sufficient cash flows from operations to fund
its operating requirements during 2007.
F-17