Windstream 2007 Annual Report Download - page 129

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies and Changes, Continued:
Common shares in periods preceding the spin off from Alltel were assumed to total 402.9 million, representing the
shares issued to Alltel shareholders pursuant to the spin off of the Alltel wireline division and were used to reflect
earnings per share amounts for those periods. A reconciliation of the net income and numbers of shares used in
computing basic and diluted earnings per share was as follows for the years ended December 31:
(Millions, except per share amounts) 2007 2006 2005
Basic earnings per share:
Income before extraordinary item and cumulative effect of
accounting change $ 917.1 $ 445.6 $ 381.7
Extraordinary item - 99.7 -
Cumulative effect of accounting change - - (7.4)
Net income applicable to common shares $ 917.1 $ 545.3 $ 374.3
Weighted average common shares outstanding for the year 471.9 435.2 402.9
Basic earnings per share:
Income before extraordinary item and cumulative effect of
accounting change $1.94 $1.02 $.95
Extraordinary item - .23 -
Cumulative effect of accounting change - - (.02)
Net income $1.94 $1.25 $.93
Diluted earnings per share:
Weighted average common shares outstanding for the year 471.9 435.2 402.9
Increase in shares resulting from:
Non-vested restricted stock awards 1.1 0.2 -
Weighted average common shares, assuming conversion of the
above securities 473.0 435.4 402.9
Diluted earnings per share:
Income before extraordinary item and cumulative effect of
accounting change $1.94 $1.02 $.95
Extraordinary item - .23 -
Cumulative effect of accounting change - - (.02)
Net income $1.94 $1.25 $.93
Related Party Transactions – On November 30, 2007 Windstream completed the split off of its directory
publishing business in a tax-free transaction with entities affiliated with Welsh, Carson, Anderson and Stowe
(“WCAS”), a private equity investment firm and a Windstream shareholder. The Company received
$506.7 million in consideration in exchange for its publishing business (See Note 3). In connection with the
announcement of the transaction, Anthony J. deNicola, a general partner of WCAS, resigned from the Windstream
Board of Directors on December 14, 2006.
For the periods through July 17, 2006, certain services such as information technology, accounting, legal, tax,
marketing, engineering, and risk and treasury management were provided to the Company by Alltel. Expenses
were allocated based on actual direct costs incurred. Where specific identification of expenses was not practicable,
the cost of such services was allocated based on the most relevant allocation method to the service provided:
either net sales of the Company as a percentage of net sales of Alltel, total assets of the Company as a percentage
of total assets of Alltel, or headcount of the Company as a percentage of headcount of Alltel. Total expenses
allocated to the Company were $163.0 million in 2006 and $300.5 million in 2005. The costs of these services
charged to the Company and the allocated liabilities assigned to the Company are not necessarily indicative of the
costs and liabilities that would have been incurred if the Company had performed these functions as a stand-alone
entity. However, management believes that methods used to make such allocations were reasonable, and that the
costs of these services charged to the Company were reasonable representations of the costs that would have been
incurred if the Company had performed these functions as a stand-alone company.
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