Windstream 2007 Annual Report Download - page 144

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Financial Instruments:
The Company’s financial instruments consist primarily of cash and short-term investments, accounts receivable,
accounts payable, long-term debt and interest rate swaps. The carrying amount of cash and short-term
investments, accounts receivable and accounts payable was estimated by management to approximate fair value
due to the relatively short period of time to maturity for those instruments. The fair values of the Company’s long-
term debt and interest rate swaps were as follows at December 31:
(Millions) 2007 2006
Fair
Value
Carrying
Amount
Fair
Value
Carrying
Amount
Long-term debt, including current maturities $ 5,444.6 $ 5,355.5 $ 5,782.3 $ 5,488.4
Interest rate swaps $ 83.2 $ 83.2 $ 39.0 $ 39.0
The fair value estimates were based on a discounted cash flow of the outstanding long-term debt using the
weighted maturities and interest rates currently available in the long-term financing markets. Changes in fair value
of the undesignated portion of interest rate swaps totaled $3.1 million and was included in other income, net in the
accompanying consolidated statement of income for the year ended 2007.
7. Supplemental Cash Flow Information:
Supplemental cash flow information was as follows for the years ended December 31:
(Millions) 2007 2006 2005
Interest paid $ 441.2 $ 77.1 $ 17.9
Income taxes paid $ 206.5 $ 396.9 $ 215.4
Of the interest and income taxes paid in 2006, $11.3 million and $265.1 million, respectively, was paid by Alltel,
which Windstream funded through advances to Alltel as reflected in financing activities in the consolidated
statements of cash flows. All of the interest and income taxes paid in 2005 were paid by Alltel.
Additionally, the Company declared and accrued cash dividends of $113.6 million and $119.2 during the fourth
quarters of 2007 and 2006, respectively, which were subsequently paid on January 15, 2008 and January 16, 2007,
respectively.
Pursuant to the spin off, Alltel transferred certain wireline assets and liabilities to Alltel Holding Corp. at their
historical cost basis. During 2006, Alltel transferred to the Company $101.5 million in net plant assets,
$191.6 million in pension assets and $24.2 million of related post-retirement benefit obligations, and
$62.8 million in net deferred income tax assets, which were included in net property, plant and equipment, other
assets, other liabilities and deferred income taxes, respectively, in the Company’s unaudited consolidated balance
sheet at December 31, 2006. During the first quarter of 2007, $4.7 million of additional net plant assets,
$1.2 million of related deferred tax liabilities, and $0.4 million of additional pension assets were identified by
Alltel as being attributable to Alltel Holding Corp. The Company recorded this non-cash transfer from Alltel as an
adjustment to additional paid-in capital.
Pursuant to the split off of the directory publishing business (See Note 3), Windstream and Holdings executed a
non-cash debt-for-debt exchange whereby Windstream received securities from Holdings valued at
$210.5 million. Windstream exchanged these Holdings debt securities for outstanding Windstream debt securities,
which were then retired (See Note 5). In addition to receiving a special cash dividend and debt securities,
Windstream received approximately 19.6 million outstanding shares of its common stock, which were valued at
$253.5 million, in exchange for its contribution of the publishing business to Holdings. These shares were
subsequently retired.
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