Windstream 2008 Annual Report Download - page 51

Windstream Corporation
Form 10-K, Part I
Item 1. Business
Immediately after the consummation of the spin off, Alltel Holding Corp. merged with and into Valor, with Valor
continuing as the surviving corporation. The merger was accounted for using the purchase method of accounting for
business combinations in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141 “Business
Combinations”, with Alltel Holding Corp. serving as the accounting acquirer. The accompanying consolidated
financial statements reflect the combined operations of Alltel Holding Corp. and Valor following the spin off and
merger transactions on July 17, 2006. Results of operations prior to the merger and for all historical periods presented
are for Alltel Holding Corp. The resulting company was renamed Windstream Corporation. As a result of the merger,
all of the issued and outstanding shares of the Company’s common stock were converted into the right to receive an
aggregate number of shares of common stock of Valor. Valor issued in the aggregate approximately 403 million shares
of its common stock to Alltel shareholders pursuant to the merger, or 1.0339267 shares of Valor common stock for
each share of the Company’s common stock outstanding as of the effective date of the merger. Upon completion of the
merger, Alltel’s stockholders owned approximately 85 percent of the outstanding equity interests of the surviving
corporation, Windstream, and the stockholders of Valor owned the remaining approximately 15 percent of such equity
interests. In addition, Windstream assumed Valor debt valued at $1,195.6 million.
MATERIAL ACQUISITIONS COMPLETED DURING THE LAST FIVE YEARS
On August 31, 2007, Windstream completed the acquisition of CT Communications, Inc. (“CTC”) in a transaction
valued at $584.3 million. Under the terms of the agreement the shareholders of CTC received $31.50 in cash for each
of their shares with a total cash payout of $652.2 million. The transaction value also includes a payment of $37.5
million made by Windstream to satisfy CTC’s debt obligations, offset by $105.4 million in cash and short-term
investments held by CTC. Including $25.3 million in severance and other transaction-related expenses, the total cost of
the acquisition was $609.6 million. Windstream financed the transaction using the cash acquired from CTC, $250.0
million in borrowings available under its revolving line of credit, and additional cash on hand.
The premium paid by Windstream in this transaction is attributable to the strategic importance of the CTC acquisition.
The 132,000 access lines and 31,000 high-speed Internet customers added through the acquisition significantly
increased Windstream’s presence in North Carolina and provided the opportunity to generate significant operating
efficiencies with contiguous Windstream markets. The transaction has increased Windstream’s position in these
markets where it can leverage its brand and bring significant value to customers by offering competitive bundled
services. The former CTC markets have high-speed Internet availability to 95 percent of its access lines, 75 percent of
which can offer speeds up to 10Mb.
As previously discussed, on July 17, 2006, Alltel Holding Corp. merged with and into Valor, with Alltel Holding Corp.
serving as the accounting acquirer. Through this transaction, Windstream added approximately 500,000 customers in
complementary markets with favorable rural characteristics making the Company one of largest local
telecommunications carriers in the United States.
MATERIAL DISPOSITIONS COMPLETED DURING THE LAST FIVE YEARS
On November 21, 2008, Windstream completed the sale of its wireless business to AT&T Mobility II, LLC for
approximately $56.7 million. Windstream recognized a pre-tax loss of $21.3 million to reduce the carrying value of the
assets sold to the transaction price less costs to sell. Completion of the transaction allowed management to divest of a
non-core asset. The transaction included approximately 52,000 wireless customers, spectrum licenses and cell sites
covering a four-county area of North Carolina with a population of approximately 450,000, and six retail locations.
On November 30, 2007, Windstream completed the split off of its directory publishing business (the “publishing
business”) in a tax-free transaction with entities affiliated with Welsh, Carson, Anderson & Stowe (“WCAS”), a private
equity investment firm and Windstream shareholder.
To facilitate the split off transaction, Windstream contributed the publishing business to a newly formed subsidiary
(“Holdings”). Holdings paid a special cash dividend to Windstream in an amount of $40.0 million, issued additional
shares of Holdings common stock to Windstream, and distributed to Windstream certain debt securities of Holdings
having an aggregate principal amount of $210.5 million. Windstream exchanged the Holdings debt securities for
outstanding Windstream debt securities with an equivalent fair market value, and then retired those securities.
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