Windstream 2006 Annual Report Download - page 147

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Spin-off of Company from Alltel Corporation and Merger with Valor Communications Group, Inc.,
Continued:
The following table summarizes the allocation of the cost of the Merger to the assets acquired and liabilities assumed and
related deferred income taxes as of the acquisition date:
(Millions) Total
Fair value of assets acquired:
Current assets $ 61.0
Investments 6.9
Property, plant and equipment 736.4
Other assets 10.3
Goodwill 746.3
Franchise rights 600.0
Customer list 210.0
Total assets acquired 2,370.9
Fair value of liabilities assumed:
Current liabilities (111.1)
Deferred income taxes established on acquired assets (258.6)
Long-term debt (1,195.6)
Other liabilities (58.7)
Total liabilities assumed (1,624.0)
Common stock issued (815.9)
Cash acquired from Valor $ 69.0
In connection with the merger, the Company recorded $13.7 million of severance and severance-related costs and $4.1
million of contract termination costs, which are reflected in goodwill in the above allocation of the cost of the merger in
accordance with Emerging Issues Task Force (“EITF”) Issue No. 95-3, “Recognition of Liabilities in Connection with a
Purchase Business Combination.” We paid $8.8 million in severance and severance-related costs and $0.3 million of the
contract termination costs in 2006. The remaining costs, which are included in other current liabilities in the consolidated
balance sheet, will be paid in 2007 with cash from operations.
The following unaudited pro forma condensed consolidated results of income of Windstream for 2006 and 2005,
respectively, assume that the spin-off from Alltel and merger with Valor occurred as of January 1, 2005:
(Millions, except per share amounts) 2006 2005
Revenues and sales $3,299.7 $3,413.5
Income before extraordinary item and cumulative effect of
accounting change (a) $ 438.5 $ 355.8
Net income (a) $ 538.2 $ 348.4
Earnings per share before extraordinary item and cumulative effect
of accounting change:
Basic $.93 $.75
Diluted $.93 $.75
Earning per share:
Basic $1.14 $.74
Diluted $1.14 $.74
(a) Pro forma income before extraordinary item and cumulative effect of accounting change and pro forma net income
for 2005 include a $29.3 million loss recorded by Valor for the prepayment of outstanding borrowings.
The unaudited pro forma information presents the combined operating results of Alltel Holding Corp. and the former Valor,
with the results prior to the acquisition date adjusted to include the pro forma impact of the following: the elimination of
transactions between Alltel Holding Corp. and Valor; additional amortization of intangible assets resulting from the merger;
the elimination of merger expenses; the adjustment of interest expense reflecting the new Windstream debt structure; and
the impact of income taxes on the pro forma adjustments utilizing Windstream’s statutory tax rate of 39.35 percent.
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