Windstream 2006 Annual Report Download - page 85

Windstream Corporation
Form 10-K, Part I
Item 2. Properties
PRODUCT DISTRIBUTION PROPERTY
Properties of the product distribution operations mainly consist of office and warehouse facilities and software to
support the business units in the distribution of telecommunications products. The total gross investment by category
for the non-wireline operations of the Company as of December 31, 2006, was as follows:
(Millions)
Land $-
Buildings and leasehold improvements 0.3
Software, including internally developed 6.5
Furniture, fixtures, vehicles and other 4.8
Total $ 11.6
Windstream also holds a $22.0 million gross investment in property used in its publishing business. These assets are
included in “Assets held for sale” in the December 31, 2006 consolidated balance sheet pursuant to the sale of that
business as discussed in Note 17 (“Pending Transactions”) to the consolidated financial statements included in the
financial supplement on page F-76. Certain Windstream properties are pledged as collateral as discussed further in
Note 15 (“Supplemental Guarantor Information”) on pages F-67 to F-74.
Item 3. Legal Proceedings
On October 16, 2006, the Company received a negative ruling in a binding arbitration proceeding previously brought
against Valor Communications Southwest LLC and Valor Communications Group, Inc., by former employees
regarding stock option award agreements. The arbitrator awarded the former employees a collective interim award of
$6.2 million for the value of options that the Company asserts were without value immediately prior to Valor’s initial
public offering in February 2005. The basis for the interim award was the arbitrator’s finding that these particular
claimants’ options were extended past the initial public offering date. On January 8, 2007, the arbitrator entered a final
award in favor of the claimants totaling $7.2 million. The Company previously established a liability in the amount of
approximately $9.4 million through a charge to goodwill to reflect the interim award and other potential damages that
could have been part of the final award. The Company has reduced this liability and related charge to goodwill by
approximately $2.2 million to reflect the actual amount of the final award. The claimants have filed separate
complaints to confirm the award in Oklahoma federal district court. The Company has filed motions in Oklahoma to
dismiss, or alternatively to transfer, the complaints to Texas federal district court and also filed a separate motion to
vacate the arbitrator’s award in Texas federal district court. The Company intends to vigorously assert and defend its
position in the matter.
The Company is party to various other legal proceedings. Although the ultimate resolution of these various proceedings
cannot be determined at this time, management of the Company does not believe that such proceedings, individually or
in the aggregate, will have a material adverse effect on the future consolidated results of operations, cash flows or
financial condition of the Company.
In addition, management of the Company is currently not aware of any environmental matters that, individually or in
the aggregate, would have a material adverse effect on the consolidated financial condition or results of operations of
the Company.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to the security holders for a vote during the fourth quarter of 2006.
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