Windstream 2006 Annual Report Download - page 153

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Supplemental Cash Flow Information, Continued:
As discussed further in Note 2 above, the Company received various non-cash transfers of assets and liabilities in
conjunction with its spin-off from Alltel and merger with Valor, and issued the Company Securities. Additionally,
the Company declared and accrued cash dividends of $119.2 million during the period that were subsequently paid
on January 16, 2007.
8. Employee Benefit Plans and Postretirement Benefits:
As discussed in Note 3, the Company adopted the provisions of SFAS No. 158 as of December 31, 2006. This
required the Company to recognize the overfunded and underfunded status of the Company’s defined benefit
pension and other postretirement plans by recognizing the actuarial gains and losses and prior service costs as a
component of accumulated other comprehensive income (loss). The following table summarizes the effects of
applying SFAS No. 158 within Windstream’s consolidated balanced sheet as of December 31, 2006:
(Millions)
Before
Application
of SFAS
No. 158
SFAS
No. 158
Adjustments
After
Application
of SFAS
No. 158
Other assets – prepaid pension benefit costs $ 150.3 $ (103.2) $ 47.1
Total assets $ 8,133.9 $ (103.2) $ 8,030.7
Other liabilities – other postretirement benefit obligation $ 157.6 $ 104.8 $ 262.4
Other liabilities – pension benefit costs $ 11.8 $ 1.3 $ 13.1
Deferred taxes $ 1,072.9 $ (82.1) $ 990.8
Total liabilities $ 7,536.9 $ 24.0 $ 7,560.9
Accumulated other comprehensive income (loss) $ (23.6) $ (127.2) $ (150.8)
Total shareholders’ equity $ 597.0 $ (127.2) $ 469.8
Prior to the spin-off from Alltel, substantially all of the Company’s employees participated in a non-contributory,
qualified defined benefit pension plan maintained by Alltel. Prior to January 1, 2005, employees of Windstream
Yellow Pages did not participate in the plan. In December 2005, the qualified defined benefit pension plan was
amended such that future benefit accruals for all eligible nonbargaining employees ceased as of December 31,
2005 (December 31, 2010 for employees who had attained age 40 with two years of service as of December 31,
2005). Expenses recorded by the Company related to the pension plan amounted to $9.2 million in the period
ended July 17, 2006, and $15.1 million and $11.3 million in the years ended December 31, 2005 and 2004,
respectively. These expenses are included in cost of services and selling, general, administrative and other
expenses in the consolidated statements of income. No allocation of the Company’s share of the pension plan’s
assets or liabilities were included in the accompanying consolidated balance sheet as of December 31, 2005.
Following the spin-off, Windstream established a qualified defined benefit pension plan whose provisions are
substantially equivalent to the provisions of the plan maintained by Alltel. In conjunction with establishing the new
plan and prior to adopting SFAS No. 158, the Company received from Alltel net prepaid pension assets totaling
$191.6 million. The Company also assumed certain obligations totaling $33.5 million from a non-contributory
qualified pension plan formerly sponsored by Valor. In total, approximately $850.0 million in assets were
transferred into a master trust, which the Company created specifically to hold the assets of its employee benefit
plans. The Valor plan was merged into the Windstream plan effective December 31, 2006. After merging with the
Valor plan and adopting the provisions of SFAS No. 158, Windstream recognized prepaid pension assets totaling
$47.1 million as of December 31, 2006, which is included in other assets in the accompanying consolidated
balance sheet.
The Company also maintains supplemental executive retirement plans that provide unfunded, non-qualified
supplemental retirement benefits to a select group of management employees. As of December 31, 2006,
Windstream recognized a pension obligation of $13.1 million related to executive retirement agreements, including
$2.1 million related to three agreements accounted for under APB No 12, which is included in other liabilities in
the accompanying consolidated balance sheet. There are no assets held in these supplemental retirement pension
plans, as the Company funds the accrued costs of the plans as benefits are paid.
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