Windstream 2006 Annual Report Download - page 161

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Restructuring and Other Charges, Continued:
During 2006, the Company incurred $27.6 million of costs in connection with its spin-off from Alltel and merger
with Valor. These costs consisted of $7.9 million of consulting and legal fees, $13.8 million of signage and other
costs to rebrand the Company’s offices and vehicles, and $5.9 million of computer system separation and
conversion costs. Of these charges, $26.6 million was paid in cash during the year, and $0.8 million related to a
non-cash adjustment of compensation expense relating to the accelerated vesting of employees’ Alltel restricted
stock pursuant to the spin-off. The remaining liability of $0.2 million will be funded through operating cash flows
and paid during 2007.
In the fourth quarter of 2006, the Company announced a realignment of its operational functions to better serve
customers and operate more efficiently. These changes will result in the elimination of approximately 180 net
employee positions during the first half of 2007. In connection with these activities, the Company recorded a
restructuring charge of $10.6 million consisting of severance and employee benefits related to this planned
workforce reduction. These payments will be made to affected employees during the first half of 2007 as
positions are eliminated and will be funded through operating cash flows.
On December 12, 2006 Windstream announced that it would split off its directory publishing business in what
Windstream expects to be a tax-free transaction with entities affiliated with Welsh, Carson, Andersen and Stowe,
a private equity investment firm (see Note 17, “Pending Transactions”). The Company incurred $11.2 million of
incremental costs, primarily consisting of investment banker, audit and legal fees in the fourth quarter of 2006, of
which $1.8 million had been paid by the end of the year. The remaining fees will be paid pursuant to the closing
of the transaction in 2007 and will be funded through operating cash flows.
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
Costs associated with pending 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 its plans to reorganize its operations and support teams. Also, during
February 2004, the Company announced its 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.
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