Windstream 2008 Annual Report Download - page 164

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Commitments and Contingencies:
Lease Commitments – Minimum rental commitments for all non-cancelable operating leases, consisting
principally of leases for network facilities, real estate, office space, and office equipment were as follows as of
December 31, 2008:
Year (Millions)
2009 $ 24.3
2010 21.0
2011 13.2
2012 5.4
2013 0.9
Thereafter 0.1
Total $ 64.9
Rental expense totaled $25.3 million in 2008, $19.0 million in 2007 and $18.7 million in 2006.
Litigation – During the third quarter of 2007, the staff of a state PUC notified the Company that the PUC Staff
believed the Company had been over-compensated from its state universal service fund dating back to 2000 by the
amount of $6.1 million plus interest in the amount of $1.2 million (for a total $7.3 million). On October 18, 2007,
the PUC Staff issued a Notice of Violation and recommended that the Company be assessed a penalty in the
amount of $5.2 million (which was later revised to $8.2 million) in addition to the initial refund request for failure
to refund the requested amount. The case was docketed and a hearing was conducted in September 2008. The
Company’s position was that its universal service receipts in question were in compliance with all applicable
regulatory requirements, that it was not over-compensated and that there should be no refund or penalty. On
December 11, 2008, the Administrative Law Judge (“ALJ”) recommended that the Company reimburse $8.0
million (including interest) to the fund to account for the alleged overpayments, but that no administrative
penalties should be imposed. The recommendation of the ALJ was approved by the commission on January 29,
2009. A liability of $8.0 million is included in other current liabilities of the accompanying consolidated balance
sheet related to this issue, which we expect to pay in the first quarter of 2009.
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 income, 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.
14. Business Segments:
The Company disaggregates its business operations based upon differences in products and services. The
Company’s wireline segment consists of Windstream’s retail and wholesale telecommunications services,
including local telephone, high-speed Internet, long distance, and other services in 16 states. The Company does
not have separate segment managers overseeing its retail and wholesale telecommunications services. Therefore,
in assessing operating performance and allocating resources, the chief operating decision maker’s focus is at a
level that consolidates the results of all services. In addition, incentive-based compensation for the wireline
segment managers is directly tied to the combined operating results of the Company’s total wireline operations.
Accordingly, the Company manages its wireline-based services as a single operating segment. The product
distribution segment consists of warehouse and logistics operations, and it procures and sells telecommunications
infrastructure and equipment to both affiliated and non-affiliated businesses.
Other operations consisted of the Company’s directory publishing and telecommunications information services
businesses. Prior to classifying the wireless business as discontinued operations (see Note 16), the wireless
business was also presented as other operations. On November 30, 2007, Windstream completed the split off of its
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