Windstream 2009 Annual Report Download - page 142

Changes in the fair value of the designated portion of the Company’s derivative instruments are reported as a
component of other comprehensive income (loss) in the current period and will be reclassified into earnings as the
hedged transaction affects earnings. Changes in the fair value of the undesignated portions are recognized in other
income, net. The Company settles interest payments on its swaps based on the LIBOR rate. The Company does not
expect any changes in the effectiveness of its swaps due to counterparty risk or further prepayment of hedged items,
but any such changes could result in a loss of critical terms matching and subsequently an increase in the ineffective
portion of the swaps. An increase in the value of the ineffective portion of its swaps either through further
de-designation of existing swaps or through further decreases in the LIBOR rate could have an adverse impact on the
Company’s future earnings.
See Notes 2, 5 and 6 for additional information on Windstream’s derivative instruments.
Income Taxes – Our estimates of income taxes and the significant items resulting in the recognition of deferred tax
assets and liabilities are disclosed in Note 12 and reflect our assessment of future tax consequences of transactions that
have been reflected in our financial statements or tax returns for each taxing jurisdiction in which we operate. Actual
income taxes to be paid could vary from these estimates due to future changes in income tax law or the outcome of
audits completed by federal and state taxing authorities. Included in the calculation of our annual income tax expense
are the effects of changes, if any, to our income tax reserves for uncertain tax positions. We maintain income tax
reserves for potential assessments from the IRS or other taxing authorities. The reserves are determined in accordance
with authoritative guidance and are adjusted, from time to time, based upon changing facts and circumstances. Changes
to the income tax reserves could materially affect our future consolidated operating results in the period of change. In
addition, a valuation allowance is recorded to reduce the carrying amount of deferred tax assets unless it is more likely
than not that such assets will be realized.
Recently Issued Authoritative Guidance
The following authoritative guidance will be adopted by the Company in the reporting period indicated. This
authoritative guidance, together with the Company’s evaluation of the related impact to the consolidated financial
statements, is more fully described in Note 2.
• Revenue Arrangements with Multiple Element Deliverables (first quarter of 2011)
• Determining the Primary Beneficiary of a Variable Interest Entity (first quarter of 2010)
• Accounting for Transfers of Financial Assets (first quarter of 2010)
Forward-Looking Statements
This Management’s Discussion and Analysis of Financial Condition and Results of Operations includes, and future
filings on Form 10-K, Form 10-Q and Form 8-K and future oral and written statements by Windstream and our
management may include, certain forward-looking statements. Windstream claims the protection of the safe-harbor for
forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 for this Annual Report
on Form 10-K. Forward looking statements include, but are not limited to, statements about expected levels of support
from universal service funds or other government programs, expected rates of loss of access lines or intercarrier
compensation, our expected ability to fund operations from cash flows from operations, our expectation of no pension
contribution in 2010, expected synergies and other benefits from completed and pending acquisitions, expected
effective federal income tax rates and forecasted capital expenditure amounts. These and other forward-looking
statements are based on estimates, projections, beliefs, and assumptions that Windstream believes are reasonable but
are not guarantees of future events and results. Actual future events and results of Windstream may differ materially
from those expressed in these forward-looking statements as a result of a number of important factors.
Factors that could cause actual results to differ materially from those contemplated in our forward looking statements
include, among others:
• further adverse changes in economic conditions in the markets served by Windstream;
• the extent, timing and overall effects of competition in the communications business;
• continued access line loss;
• the impact of new, emerging or competing technologies;
• the adoption of inter-carrier compensation and/or universal service reform proposals by the Federal
Communications Commission or Congress that results in a significant loss of revenue to Windstream;
• the risks associated with the integration of acquired businesses or the ability to realize anticipated synergies, cost
savings and growth opportunities;
• unexpected adverse results related to our data center migration;
• for our competitive local exchange carrier (“CLEC”) operations, adverse effects on the availability, quality of
service and price of facilities and services provided by other incumbent local exchange carriers on which our
CLEC services depend;
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