Windstream 2007 Annual Report Download - page 157

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Business Segments, Continued:
into a Joint Operating Agreement (“JOA”) with Cingular and paid approximately $23.0 million to Cingular to
partition its area of the Cingular digital network.
Under the JOA, the Company purchases pre-defined services such as switching from Cingular, which now
operates as AT&T Mobility (“AT&T”), and its products and services are co-branded with AT&T. The Company
remains subject to certain conditions including technology, branding, and service offering requirements, but it
does have the ability to customize pricing plans. Additionally, the JOA with AT&T allows the Company to benefit
from their nationally recognized brand and nationwide network, provides access to favorable purchasing discounts
for cell site electronics, handsets and equipment, and enables the Company to participate in shared market
advertising. The JOA may at times require the Company to implement technical changes in its network in order to
make the network consistent with AT&T’s technical standards. On November 30, 2007, Windstream completed
the split off of its directory publishing business (See Note 3). Prior to the split off, the Company’s publishing
subsidiary coordinated advertising, sales, printing, and distribution for 356 telephone directory contracts in 34
states. Immediately after the consummation of the spin off and merger with Valor in July 2006, the
telecommunications information services operations no longer earned revenues or incurred expenses for providing
data processing and outsourcing services as Valor was its sole external customer.
The Company accounts for affiliated sales at current market prices, tariff rates, or negotiated prices. The
evaluation of segment performance is based on segment income, which is computed as revenues and sales less
operating expenses, excluding the effects of strategic transaction costs as discussed in Note 10. In addition,
non-operating items such as other income, net, gain on sale of assets, loss on extinguishment of debt,
intercompany interest income, interest expense and income taxes have not been allocated to the segments.
(Millions)
For the year ended December 31, 2007
Wireline
Product
Distribution
Other
Operations
Total
Segments
Revenues and sales from unaffiliated customers $ 3,019.4 $ 118.0 $ 123.4 $ 3,260.8
Affiliated revenues and sales 93.1 221.9 14.5 329.5
Total revenues and sales 3,112.5 339.9 137.9 3,590.3
Operating expenses 1,448.6 340.4 128.8 1,917.8
Depreciation and amortization 505.2 0.8 1.5 507.5
Restructuring charges 4.5 0.1 - 4.6
Total costs and expenses 1,958.3 341.3 130.3 2,429.9
Segment income $ 1,154.2 $ (1.4) $ 7.6 $ 1,160.4
Assets $ 8,066.9 $ 35.7 $ 108.1 $ 8,210.7
Capital expenditures $ 365.4 $ 0.1 $ 0.2 $ 365.7
(Millions)
For the year ended December 31, 2006
Wireline
Product
Distribution
Other
Operations
Total
Segments
Revenues and sales from unaffiliated customers $ 2,635.3 $ 141.0 $ 150.8 $ 2,927.1
Affiliated revenues and sales 123.3 193.9 11.5 328.7
Total revenues and sales 2,758.6 334.9 162.3 3,255.8
Operating expenses 1,381.8 328.7 147.5 1,858.0
Depreciation and amortization 446.0 1.4 2.2 449.6
Restructuring charges 10.5 0.1 - 10.6
Total costs and expenses 1,838.3 330.2 149.7 2,318.2
Segment income $ 920.3 $ 4.7 $ 12.6 $ 937.6
Assets $ 7,897.1 $ 53.8 $ 79.8 $ 8,030.7
Capital expenditures $ 373.6 $ 0.2 $ - $ 373.8
F-71