Windstream 2009 Annual Report Download - page 132

The following discussion and analysis details Windstream’s consolidated merger and integration and restructuring
costs.
Merger, Integration and Restructuring Costs
Costs triggered by strategic transactions, including transaction costs, rebranding costs and system conversion costs are
unpredictable by nature and are not included in the determination of segment income. Restructuring charges, consisting
primarily of severance and employee benefit costs, are triggered by the Company’s continued evaluation of its
operating structure and identification of opportunities for increased operational efficiency and effectiveness. These
costs should not necessarily be viewed as non-recurring.
Set forth below is a summary of merger and integration and restructuring costs recorded for the years ended
December 31:
(Millions) 2009 2008 2007
Wireline merger and integration costs, as previously discussed $ 22.3 $ 6.2 $ 4.5
Directory Publishing merger and integration costs, as previously discussed - - 3.7
Total restructuring charges 9.3 8.5 4.6
Total merger, integration and restructuring costs $ 31.6 $ 14.7 $ 12.8
Summary of Liability Activity Related to Both Merger and Integration Costs and Restructuring Charges
The following table is a summary of liability activity related to both merger and integration costs and restructuring
charges as of December 31:
(Millions) 2009 2008 2007
Accrued merger, integration and restructuring charges at beginning of period $ 8.3 $ 14.7 $ 28.9
Total merger and integration costs, net of non-cash charges 22.3 1.6 8.2
Total restructuring charges 9.3 8.5 4.6
CTC merger and integration costs included in goodwill - - 25.3
Merger, integration and restructuring charges paid (33.3) (16.5) (52.3)
Accrued merger, integration and restructuring charges at end of period $ 6.6 $ 8.3 $ 14.7
As of December 31, 2009, the remaining liability of $6.6 million for accrued merger, integration and restructuring
charges consisted of $0.4 million of Valor lease termination costs and $6.2 million of accrued severance costs
primarily associated with the integration of D&E and Lexcom. Valor lease payments will be made over the remaining
term of the lease. The severance and related employee costs will be paid in 2010. Each of these payments will be
funded through operating cash flows.
Merger, integration and restructuring costs decreased net income $19.4 million, $9.0 million and $8.8 million for the
years ended December 31, 2009, 2008 and 2007, respectively, giving consideration to tax benefits on deductible items.
See Note 10 for additional information regarding these charges.
The following discussion and analysis details results for Windstream’s consolidated operating income and all other
consolidated results presented below operating income.
Operating income decreased $175.5 million, or 15.5 percent, in 2009 and $17.5 million, or 1.5 percent, in 2008. The
declines in 2009 were primarily due to the unfavorable impact of pension and amortization expense. In addition,
operating income during both years was unfavorably impacted by revenue declines associated with continued access
line losses. These declines were offset by the favorable impacts of high-speed Internet customer growth and expense
management initiatives.
Other Income, Net
Set forth below is a summary of other income, net for the years ended December 31:
(Millions) 2009 2008 2007
Interest income on cash and short-term investments $ 1.4 $ 2.7 $ 12.3
Sale of investments - 7.7 -
Mark-to-market of interest rate swap agreement 3.0 (5.8) (3.1)
Interest expense on undesignated swaps (4.7) (2.3) -
Other expense, net (0.8) (0.2) 1.9
Other income, net $ (1.1) $ 2.1 $ 11.1
Other income, net decreased $3.2 million in 2009 and decreased $9.0 million in 2008.
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