Windstream 2009 Annual Report Download - page 152

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Background and Basis for Presentation:
Formation of Windstream – On July 17, 2006, Alltel Corporation, which has subsequently merged with Verizon
Communications, Inc. (“Alltel”), completed the spin off of its wireline telecommunications division and
immediately merged with and into Valor Communications Group Inc. (“Valor”), with Valor continuing as the
surviving corporation. The resulting company was renamed Windstream Corporation (“Windstream”, “we”, or the
“Company”), which is a customer-focused telecommunications company that provides phone, high-speed Internet
and digital television services. The Company also offers a wide range of IP-based voice and data services and
advanced phone systems and equipment to businesses and government agencies. The Company serves
approximately 3.0 million customers primarily located in rural areas in 16 states.
Basis of Presentation – The preparation of financial statements, in accordance with accounting principles
generally accepted in the United States, requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities.
The estimates and assumptions used in the accompanying consolidated financial statements are based upon
management’s evaluation of the relevant facts and circumstances as of the date of the consolidated financial
statements. Actual results may differ from the estimates and assumptions used in preparing the accompanying
consolidated financial statements, and such differences could be material.
Certain prior year amounts have been reclassified to conform to the 2009 financial statement presentation. These
changes and reclassifications did not impact net or comprehensive income.
2. Summary of Significant Accounting Policies and Changes:
Significant Accounting Policies
Consolidation of Financial Statements – Our consolidated financial statements include the accounts of
Windstream and its subsidiaries. All significant affiliated transactions have been eliminated.
Cash and Cash Equivalents – Cash and cash equivalents consist of highly liquid investments with original
maturities of three months or less.
Accounts Receivable – Accounts receivable consist principally of trade receivables from customers and are
generally unsecured and due within 30 days. Expected credit losses related to trade accounts receivable are
recorded as an allowance for doubtful accounts in the consolidated balance sheets. In establishing the allowance
for doubtful accounts, the Company considers a number of factors, including historical collection experience,
aging of the accounts receivable balances, current economic conditions and a specific customer’s ability to meet
its financial obligations to the Company. When internal collection efforts on accounts have been exhausted, the
accounts are written off by reducing the allowance for doubtful accounts. Concentration of credit risk with respect
to accounts receivable is limited because a large number of geographically diverse customers make up the
Company’s customer base, thus spreading the credit risk. Due to varying customer billing cycle cut-off, the
Company must estimate service revenues earned but not yet billed at the end of each reporting period. Included in
accounts receivable are unbilled receivables related to communications revenues of $29.2 million and $31.6
million at December 31, 2009 and 2008, respectively.
Inventories – Inventories consist of finished goods and are stated at the lower of cost or market value. Cost is
determined using either an average original cost or specific identification method of valuation.
Assets Held For Sale – During 2008, Windstream received net proceeds of $17.3 million for assets acquired from
CT Communications (“CTC”), which approximated the fair value at the date of acquisition, on the sale of the
corporate headquarters building, a license for wireless spectrum and various investments designated as held for
sale. During the third quarter of 2008, Windstream recognized a non-cash impairment charge of $6.5 million
included in selling, general, administrative and other in the accompanying consolidated statements of income to
reduce the carrying value of certain wireless spectrum licenses designated as held for sale, and not used in
operations, to their fair market value in accordance with authoritative guidance. The fair market value of these
holdings was reduced to a nominal amount due to an impairment resulting from general market conditions and
limited interest on this bandwidth of spectrum. In addition, during the third quarter of 2008, certain long term
investments totaling $2.3 million, primarily consisting of a minority ownership in a private equity investment
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